10 Reasons Why You Need a Pension Plan

What is a pension plan?

A pension is something that takes care of you in your old age so that you’re not someone who lands up in the old age homes, or care facilities, because your children are too busy and caught up in the mire they call their lives. A pension, besides being your security to life and living, is also a smarter way to save for the future. 

Saving for something long-term, that too, in the future might look bleak, we understand. I mean, we all save when we find an incentive there, right? Here are the 10 reasons you have been looking for that will convince you why it’s a good idea to invest in a pension plan, and sign up right away: 

1. Our lifespans have increased

Fast flashback to a century back, and you would notice that our lifespans are increasing. All of us are living more than we used to and that means you should brace yourself for life after retirement cause that is the sensible thing to do. Why be a burden on your children, or the government, or run the risk of ending up homeless or in a shelter? I know these are crude facts but they are meant to scare you into action so that you are not only in control of your present but also your future.  Build a pension plan so that your savings for the future don’t run out and plan well. 

2. State pensions are increasingly becoming less sufficient

With the rate of inflation and the cost of living increasing everywhere and the lack of state pension increase in proportion with the former two, it is important that you realize state pensions are not going to be sufficient to ensure a life of improved well-being and general wellness. Hence, make sure you have benefits you can rely on from now on so that you don’t have to live your last few years wondering and squabbling about finance. 

3. You’ll get better tax returns

This is a fact – for every money that goes towards pension, not only are you exempted from paying taxes on that but you get handsome returns on that too! So, if you’re putting 100 cents towards your pension, you get to save 100 cents from the tax as well as receive 20 cents as return, so now you’ll have 120 cents instead of 100! Isn’t that great? 

4. Your pension would grow faster

The best thing about having a pension plan is it’ll have the ability to grow tax-free and that means it would be able to grow at a better rate, than all your other investments. In that regard, a pension plan does better for you in terms of return and long-term investment than other regular investments. 

pension grows faster

5. If you delay, you would need to invest more

The problem with starting later for your pension plan is you will have to pay more to cover your premium amount. If you start now, you pay less and get significant returns and in case of a delay, you’re robbed of those investment returns and you have to make up for the amount yourself so it becomes a greater burden on you in your last years. Start as early as you can, because, in that way, you have better chance of living a good life after your retirement. 

6. Pension plans are portable

Don’t worry if you’re changing jobs or moving cities or changing professions altogether, your pension plans go with you and you don’t lose any of it to the company or any other authority. 

7. You get to secure your future and you do it tax-free

When you retire, you will be able to take a quarter of your lump sum pension amount absolutely tax-free. That’s the rule in most countries and workplaces, and I mean, that is beyond amazing. Most of the pension plan here has been contributed by your employer or even your taxman, and you’re the one who gets to enjoy the benefit in the end. Once after you have received the lump sum amount, you can put them into a life income package that’s called annuity or have them in your savings and you can draw them out of ATMS as and when you desire. 

8. Having a pension plan will let you keep child benefit

A number of companies falling in a particular income bracket are being stripped of child benefit. You can eliminate that by having a pension plan which will let you keep the state benefit. This is because when you save for a pension, your net adjusted salary becomes lower than what you receive and that’s what your taxman considers. Accordingly, you can also reduce income tax by contributing more to your pension as that will bring down your taxable income. 

child benefit

9. In case of an emergency, your family would be taken care of

Pension plan is very similar to an insurance – but the difference allows it to operate as an insurance scheme too. If something befalls on you, and you’re no longer alive, the pension plan can be used by your family to take care of their needs, or their condition that has been unfortunate after your demise. Plan ahead so that you and your loved ones have a secure future. 

10. If you receive a work pension, it almost works like a pay rise

Let us explain this one for you because we understand it can get complicated for even the best minds! The math is simple however. When you save up for pension, your employer also pays the same amount towards your pension. When you receive your pension years later, you’re actually receiving double or triple more than what you invested over the years plus returns and interests. This works as a pay-rise, and it might not be money you’re getting then and there, but you’re definitely getting it later. The investments become solid, thanks to your employer’s contribution and they are locked in for a lot of years so the returns are amazing too! 

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