Retirement planning

Planning for retirement might seem a bit pointless if you are young. Any investment could contribute to your retirement in some way but pensions were designed to encourage it with financial incentives. You have probably been told pensions don’t perform, are risky and pointless. Those people don’t understand what a pension is.


A pension is usually set up as a trust (see trusts) which provides inheritance tax advantages. You or your employer can pay into it before income tax and national insurance is deducted or get a tax credit for the income tax already paid.


You can then choose how you invest and the level of risk you are willing to take. 


Self invested personal pensions are generally for people who have larger funds and a good understanding of investments. They are a type of private pension. 

They give the freedom to select the individual companies you like. Make sure you seek advice before getting involved with SIPPs.

Private pension

Standard private pensions and generally managed for you and invested across a range of assets to spread the risk of one company or sector not performing well.

Commercial property ownership

For those obsessed with bricks and mortar, you can own commercial property within your pension. You can buy it and manage it yourself or you can buy shares in Real Estate Investment Trusts REITs who then manage everything for you. REITs are required to pay out 90% of the rental income to the shareholders.

Tax incentives

As a basic rate taxpayer, for you to receive £68 after tax your employer will spend £113.8. That £113.8 could go straight into your pension with a salary sacrifice scheme. There is no tax on the investment gains while held within the pension scheme and 25% can be withdrawn tax free when you reach the qualifying age. Caution, the lifetime allowance, the maximum the government allows you to have in your pension without penalty will apply to larger sums and advice should be sought.

The benefit of Long Term Investments

One of the greatest benefits of long-term investment is compound interest. Interest on Interest is the real key to becoming wealthy in my opinion. 

Holding investments long term also means initial charges are spread over a longer period so have less effect on investment performance.