Frugal Living

An In-Depth Look at the Real Benefits of Tailor-Made Pensions

Not many people are busy planning for their retirement, and this is an unfortunate fact because if people simply rely on their state pension, they could very well be setting themselves up for future disappointment. All of us want to retire with no worries and with a certain amount of security, knowing that we can enjoy ourselves and give our loved ones what they deserve when we pass on. But if you are one of the few who value their decisions and would like to make a worthy decision when it comes to your retirement planning, you could definitely benefit from a tailor-made pension. Here’s a good look at the true benefits of tailor-made pensions for you.

What is it?

As its name implies, a tailor-made or tailored pension is a pension scheme or plan which is made specifically for you. It is not a generic pension which is geared towards everyone – instead, it is a pension scheme which accrues to your needs and circumstances as well as your plans when you get older. Your pension should be able to provide you with the income you require when you retire when you need it the most, and it should also provide you with a good match to the risk you would like to take when it comes to managing your money. In addition, your pension should reflect what you would really like to happen with your savings upon your death. 

Determining your pension

If you have decided that a tailor-made pension is a solution for you, you first have to determine what kind of pension you have right now. If you, for instance, have a workplace pension called a ‘final salary workplace pension’, this kind of pension promises to give you an income which is guaranteed for the rest of your life from a certain age. This is a good benefit since you don’t have to worry about any risks on investments. 

The company you work for is obligated to pay you whatever income they promise under the scheme, regardless of how much they have made on the investments from your pension contributions. But these pension schemes are not as flexible as you may think, especially in regards to early access to your pension income and passing on your pension to your loved ones when you die. If you have this kind of pension scheme and you want your pension to be passed on to your loved ones and you want to have access to your pension at an earlier point, it would be best to speak with a financial adviser so you can check how your pension can be tailored according to what you need. 

The benefits of a proper, tailor-made pension scheme 

There are tailor made pensions which can be classified as personal pensions, and these kinds of pensions can be more flexible. But this flexibility can come with more risk as well. If you are thinking of getting a personal pension, you should ask the provider how your pension savings will be invested, how your pension will be managed for you, and how much you are being charged for your pension. 

In general, a good tailor-made pension scheme should be much better than a cash ISA or a bank account. It should help you beat the inflation rates in the long-term, so your money can grow instead of decreasing in value as the cost of living rises. And whilst tax breaks and tax relief can help you deal with inflation, the way your funds are invested will play a big role in how much your pension will grow over time. A well-tailored pension will consider how much risk on investment you are willing to take, and it will also consider how long you want to wait until you can begin withdrawing funds. It will also consider any changes in your circumstances and take into account both global and local events which can affect the performance of your investments. 

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