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Who better to give you advice on pensions than the Chief Executive of the Office of the Pension Advisory Service (OPAS)

PENSIONS: THE TEN GOLDEN RULES

1. “Don’t count on the State to provide for you in old age” As a nation, we are all living longer. This means that in the years to come there will be many more pensioners than now and the value of the basic state pension may struggle to keep pace.

2. “Don’t keep putting off starting a pension plan” Because of the way compound interest works, the earlier you start a pension plan the less it will cost you. So start early and pay in as much as you can. As a rough rule of thumb a good starting point would be about half your age as a percentage of your income. So at 22 that would mean 11% of your income but if you cannot afford that much any lower amount would be useful as a start.

3. “Pensions are not the only way of saving but they are one of the most tax advantageous” Property, individual savings accounts, even paintings and other works of art are all possible alternatives. Indeed the more you diversify your investments the better it usually is. However, with an approved pension plan you receive tax relief on all your contributions at your highest personal rate. And for the most part the fund that you build up is also allowed to grow tax free.

4. “As well as your house, a pension is probably one of the biggest investments you will make in your lifetime – show an interest in it” Try to make yourself familiar with the rules of your scheme and how it works. Make sure you know with a personal pension or money purchase type company scheme what investment vehicle is being used for your monies and make sure you are comfortable with the level of risk chosen.

5. “If your employer runs a company scheme you should seriously consider joining it in preference to making your own arrangements in a personal pension” In such an arrangement the employer will be contributing to the scheme and for you not to join is therefore tantamount to giving up pay. The only exception might be in a salary related scheme if the company were to be financially insecure and in risk of becoming insolvent. With the advent of the Pension Protection Fund next year, however, some of the risks for members will be considerably reduced.

6. “Review your pension plans at regular intervals and consider the need to ‘top-up’ your investment where appropriate” You should check the regular pension statements you will receive to make sure your plan is on course to deliver the level of income you expect to receive when you retire.

7. “Get a forecast of your state pension position at least 10 years before you reach normal pension age” This will enable you to establish whether there are any gaps in your National Insurance Contributions record and give you the opportunity of making this good by paying voluntary contributions. To obtain a forecast ring the Pensions Forecasting Service on 0845 3000168.

8. “Retain all papers and other original documents relating to your pension in a safe place” These may be essential later on. It is no use trying to challenge something or for example make out a case for mis-selling without the necessary evidence some 20, 30 or 40 years after the event.

9. “Unless you feel very confident, always take professional advice before making important decisions, e.g. about changing your pension provider, seeking a transfer and so on” If you do not have a regular financial adviser you can obtain details of 3 advisers in your area by contacting IFA Promotions on 0800 0853250. For non-investment free advice and guidance generally you can also ring the OPAS Helpline on 0845 6012923.

10. “Remember, there is no such thing as a stupid question about pensions” Pensions can be immensely complicated and people sometimes feel inadequate. You should not worry about this. You have a right to have things properly explained to you in language you can understand and should not feel inhibited about asking the most basic questions.

This article is by Malcolm McClean OPAS Chief Executive

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