What Are The Pros And Cons Of A Pension Plan?


A pension plan is the accepted way of saving for retirement.  Investing money into a pension plan can help you build up a nice little nest egg and when you finally leave your place of work with a gold watch after thirty years of loyal service, you can start drawing on your pension and look forward to playing games of golf and taking trips to the seaside.

How Does a Pension Plan Work?

A pension plan is basically a way of maximising your savings so you can draw a regular income or lump sum when the time comes to hang up your tools and retire.  Instead of stashing cash in an old suitcase and burying it in the garden, you pay a monthly sum into your pension plan, which is then invested in various stocks and shares by the pension company.  In an ideal world this fund grows and when the time comes to cash it in, you should have a tidy sum, but since the world of finance is often precarious, conducting regular pension reviews is to be recommended.

How Do I Choose a Pension Plan to Suit Me?

Unless you are offered a pension scheme through your employer, your best option is to book an appointment with an independent financial advisor.  However, be aware that financial advisors are paid commission on the products they sell, so check the small print on any financial products you are offered to be certain they are not loaded up with hidden fees.

Reasons to Pay Money into a Pension Plan

  • Some pension plans are well worth investing in.  Many big employers, particularly in the public sector, offer good pension plans as part of their employment packages, so if you have the opportunity to take advantage of a good pension scheme, do so.
  • The government offers tax breaks for those who save into a pension plan, which means that the money you squirrel away for your retirement is taken from your salary before income tax is deducted.  The government does this because it would much rather you had your own pension plan than relying on a state pension in your retirement.
  • If you sign up for a pension plan with your employer, your employer has to contribute also.  Some employers are very generous with their contributions, so even if you pay nothing into the plan, it can still build up into a nice little nest egg over the years.
  • Do you really want to rely on a state pension when you retire?  The state pension as it stands is barely enough to keep a hamster alive, so if you want to enjoy a more comfortable retirement, it is never too late (assuming you aren’t about to retire) to look at pension reviews and find a retirement plan that suits.

Reasons Not to Bother with a Pension Plan

  • You have been given six months to live – enough said really.
  • You fully intend on living fast and dying young – just be sure to take out a massive life insurance policy before you go and buy that ridiculously fast motorbike.
  • You are married to a multi-billionaire and he is so besotted with you that he did not insist on a prenuptial agreement when you got hitched.  Well done!
  • You don’t work and have no intention of bothering with paid employment any time soon – if living on benefits is a lifestyle choice for you, there is no reason to worry about your retirement because the government will probably continue to offer you a comfortable existence, free from the burden of financial insecurity.
  • You have no need for material goods because you exist on a higher plane from the rest of humanity.

I hope this helps way things up for you a little easier, it’s good to have it in black and white.

Author Bio

Kay Brown is a writer who is always researching the pros and cons of financial matters such as your pension plan and pension reviews to secure your financial future.

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