- Emily Friday
Pensions for Beginners | Why Are Pensions Important?
With Pension Awareness Week last month, we decided to create a month-long series dedicated to all things pensions: why they’re important, the different types available, and how you can ensure you have a secure pension in place by the time you retire.
What is a Pension?
Put simply, a pension is money that you set aside for retirement. You don’t always do this directly: for example, your employer can contribute towards your pension, and we are all entitled to a government state pension.
Why are they so important?
Young or old, it’s important to think about your pension as early as possible. Below, we’ll outline the 3 main reasons why you should start preparing for your pension - no matter your current age!
1. Plan for the Future
This one may seem slightly obvious, but a pension can help you prepare for any unforeseen circumstances in your future. A pension provides a means of building up sums of money for your retirement in a structured way, and if you suffer ill-health, you can sometimes access your pension early.
We can never be sure what life will throw at us, so just like an emergency fund, pensions work the same way and will ensure we’re well prepared for any unexpected events.
2. Maintain Your Standard of Living
It’s no secret that getting by on the State Pension alone can be a struggle. The full basic state pension in the UK is currently only at £137.60 per week, whereas the UK poverty line in 2020 was £141!
This is barely enough to get by on a basic budget and lifestyle, but if you have a taste for the finer things and want to maintain your luxurious standard of living, you’ll want to think about other ways you can increase your pension when the time comes.
3. Peace of Mind
Did you know a pension can also act as a form of life assurance for your dependents? Many schemes will pay out a lump sum in the event of your death to people you nominate, and some schemes also offer to pay a survivors pension to a surviving dependent.
If you need to retire early for whatever reason, ensuring your pension has enough to get you by brings peace of mind not only to yourself but also to your loved ones.
Where Can I Find Out More?
To find out more about pensions, you can visit the Citizens Advice website and book a Pension Wise appointment to discuss your options.
Next week in our pension series, we’ll be covering the different types of pensions you can take advantage of. Follow us on Instagram so you don’t miss out!
If you’re serious about future-proofing your finances, having a solid budget in place can help you save the money you need to put towards a future pension.
The ImageNPay mobile app allows you to add funds to your very own prepaid digital card so that you can ensure you’re sticking to your weekly or monthly budgets - making saving a simple process.
Tap the button below to find out more!