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If you're not convinced that you need to start saving for your retirement now, here's some stark findings:

is the weekly maximum state basic pension. Can you afford to live on this? 1

of those retiring in 2013 will be below the poverty line of £8,254. 2

of retirees have not financially prepared adequately or at all for a comfortable retirement. 3

Source: 1 Gov.uk January 2014, 2 The Guardian, May 2013, 3 HSBC the future of retirement, Life after work 2013.


What is a pension?

Put simply, a pension is a tax efficient way of saving for your retirement. And the earlier you start saving the better because your money will have more time to potentially grow.

When you retire the money you've invested over the years is used to buy you a taxable income (an annuity) for life.

The amount of taxable income you get depends on a few things including the value of your pension fund and annuity rates at that time. question mark

So what factors affect the value of your pension plan?

Well, the value of your pension plan depends on a number of factors including:

  • when you start saving

  • how long you save for

  • how much you save

  • the charges taken

  • the return you get on your investments.

Bear in mind the value of your pension plan isn't guaranteed and can go down, giving you a lower income in retirement and you may get back less than you invested.

Why are pensions tax efficient?

The reason why pensions are tax efficient is because you get tax relief on what you pay in which helps increase the amount saved in your pension plan.

How it works if you’re a basic rate taxpayer

Say you are a basic rate tax payer and want to save £50 a month into your pension plan. The good news is you will only have to pay £40 as HM Revenue & Customs (HMRC) will give you an additional £10 ( basic rate tax relief).

How it works if you’re higher rate taxpayer

If you are a higher rate tax payer and want to save £60 in to your pension plan, the good news is you will only have to pay in £48 and the additional £12 is added automatically as tax relief. You can also claim back a further £12 through your self assessment tax return. So, it only costs you £36.

How it works if you’re an additional rate taxpayer

If you’re an additional rate taxpayer (with a taxable income over £150,000 year) you may also claim additional rate tax relief via your tax return.

Tax-efficient growth when you’re saving

Your pension fund grows largely tax-free, which can help to boost the amount you have in your pension plan. (Remember that the value of your fund can go down which affects how much you’ve got in your pension plan, resulting in less income when you retire and you may get back less than you invested).

Tax-free cash when you retire

The good news is that you currently have the option of taking up to 25% of your pension savings as a tax free sum.

What you do with it is entirely up to you – except for one thing – you can’t put it into another pension fund. Otherwise, you’re free to spend it or save it anyway you please.

That leaves the remaining fund to buy a taxable income. Remember this income will be smaller as the tax free cash has reduced the fund available to buy an annuity.



Please note the tax information is based on 2013/14 tax rules which may change in the future and depends on your individual circumstances.

Assuming you've now bought into the fact that it's a good idea to save for your retirement, why save in a pension?

Advantages

You get tax relief on your payments
When you save in a pension the taxman helps by providing tax relief on what you pay in. Find out how it works in Pension Basics and for more details, take a look at our Guide to Pension Plan Tax.


A pension helps you save tax when you're investing
Money in your pension fund grows largely free of tax which can help boost your pension plan. This isn't unique to pensions as other plans such as ISAs may help you save tax too.


Your employer may make payments too
The government is making changes for employers to provide access to pension schemes for their employees between now and 2018. If you're employed, it's worth checking what plans your employer has and when they will implement them. These may also provide additional benefits such as life cover and your employer may make payments to your plan.


You can access a wide choice of investment options
Saving in a pension can give you a wide choice of investments.


You get flexible retirement options
When you start to take the benefits from your pension you can choose to take your benefits to suit whether you're fully retired or semi retired. Generally, you can't take your benefits before you're at least 55 although if you can't work due to ill-health, you may be able to take your benefits before the age of 55.


You may get the option to take tax free cash
When you take your benefits, you may have the option of taking up to 25% of the pension fund you have built up as a tax free cash sum.

So, if you build up a pension fund of £100,000 for example, you may be able to take up to £25,000 as a tax free sum leaving you with £75,000 to buy a reduced taxable income (annuity).


Disadvantages

A pension might not be right for you if...


You're struggling to make ends meet
Saving for your future is important but if you're having difficulties financially in the here and now, then it may be better to concentrate on reducing your debts and getting on top of things before you think about a pension. Then as your lifestyle changes, you may want to re-consider saving for your retirement.


You need to get your hands on your pension pot
Normally you won't be able to get your hands on your pension fund until you're at least 55. When you retire you will have to convert your pension fund into a taxable income, payable for the rest of your life - this is known as an annuity. On the flip side, think of this as a good thing - you can't be tempted to dip into funds you've put aside for retirement.

If you are looking to save for a short term, then an ISA might be an alternative option.


You're not willing to take any investment risk with your money
All types of saving carries some risk, even sticking it under the mattress has some risk. The investments available in pension plans have different levels of risk. If you can't accept that the value of your pension pot may go down which will reduce the amount of taxable income you can provide in the future, then a pension may not be right for you.

The Zurich Retirement Account can help put you in control of your retirement planning by giving access to a range of investments and the flexibility to decide how and when you take your retirement benefits.

Find out more about the Zurich Retirement Account's aims, risks and commitments.

Choice now and at retirement

  • Choose from a range of investments.

  • Choose from regular and/or one-off payments.

  • Benefit from tax relief on your payments.

  • Choose to stop, restart or change your payments to suit your circumstances. You'll need to commit to making a minimum regular payment of £150 a month, or a £10,000 minimum one-off payment.

  • Provides death benefits for your loved ones if you die.

  • Choose either full or semi-retirement with our flexible retirement options.

To start a Zurich Retirement Account you need to:

  • be aged 18 or over, or

  • have been resident in the UK for tax purposes for the last six months.

To make payments to a Retirement Account you must be a relevant UK individual.

Your adviser will help you with eligibility.


The Zurich Retirement Account might be right for you if:

  • You have no access to a pension where you work.

  • You're already saving in a pension arranged through your job and want to save more (within government limits) for your retirement.

  • You are prepared to invest for the long term (10 years or more). Bear in mind the value of your pension plan isn't guaranteed and can go down, giving you a lower income in retirement and you may get back less than you invested.

  • You can commit to making a minimum regular payment of £150 a month, or a £10,000 minimum one-off payment.

  • You want to invest in the types of investments available in the plan and are aware of and accept the risks associated with them. You'll find information of what these risks are in the plan's key features.

  • You want flexibility on how and when you take your retirement benefits.

The Zurich Retirement Account may not be right for you if:

  • You can't commit to making a minimum regular payment of £150 a month, or a £10,000 minimum one-off payment.

  • You need to get your hands on your pension fund. Normally you won't be able to get your hands on your pension fund until you're at least 55.

  • You're not willing to take any investment risk with your money. If you can't accept that the value of your pension fund may go down which will reduce the amount of pension you can get in the future and you may get back less than you invested, then a pension may not be right for you.

  • You are not prepared to maintain an ongoing relationship with a financial adviser to help you manage your Zurich Retirement Account.

How to apply

It's important you make the right decisions when you choose your pension. That's why we only sell plans through a financial adviser.

The Zurich Retirement Account is available through the Zurich Portfolio, an online service that enables your adviser to look after your assets.

If you are interested in applying for a Zurich Retirement Account, your first step is to speak to a financial adviser to get advice. They will help you make sure the plan is suitable for you and help you through the application process. Bear in mind, you'll have to pay for the advice you receive.

If you don't have an adviser, you can find one in your area at www.unbiased.co.uk [Zurich is not responsible for the content of external websites]

Investing with added peace of mind – Zurich Investment Life Cover

Is the money you’re thinking of investing in your plan held on the Zurich Portfolio important to your family’s future security? Are you looking for extra peace of mind when investing in the stock market?

If you're looking for reassurance that your loved ones will get back what you invested should you die within five years of starting your Zurich Portfolio, then you may want to consider Zurich Investment Life Cover.

Our advice is get advice

You wouldn't buy a house without advice from a solicitor. Nor would you hesitate to call a plumber rather than run the risk of flooding the house.

So why risk a 'do it yourself' job on something as important as your future?

You can do a lot of the research yourself by reading guidance such as ours, but you should seek more tailored advice from a professional adviser.

You will have to pay for the advice a financial adviser gives, but this may prove to be money well spent in the long run.


Why you should seek advice

Working with a financial adviser who is authorised by the Financial Conduct Authority (FCA) can:

  • give you impartial advice to make sure you get the best deal, whether it's a Zurich product or not

  • help you gather all the information you need

  • help you understand all the little details and things you need to consider

  • work with you throughout the lifetime of the plan to make sure it still meets your needs

  • give you a greater level of protection if things go wrong. If an FCA-authorised firm gives you advice that's wrong for your circumstances, there's a system to resolve complaints and, if necessary, put things right.

Preparing for your visit with a financial adviser

It's a good idea to prepare before you speak to a financial adviser. For a start, take a look at 'Things to consider before you speak to a financial adviser'


If you haven't got a financial adviser, you can find one near you at www.unbiased.co.uk [Zurich is not responsible for the content of external websites]


While you can manage your plan yourself, it's a good idea to look at your plan with your financial adviser once a year, or more often if you hit one of life's big events.

You can keep track of fund performance, arrange changes to your investments and update your plan here.

Tools and information you might find useful

How much income might I get?

Get an idea of how much taxable income you'll get when you retire.

Get the basics on pensions

Find pensions all a bit confusing and dull? Not sure where to start? Fear not, help is at hand. This guide will take you through the basics so you can take the next steps.

Introduction to investing

This guide tells you about the investment choices available to you. We'll tell you what they are and how they work.

How much can you afford to save?

Saving could be easier than you think. See how much you could potentially save each month. It's often surprising how small savings can add up.

Why it's a good idea to start saving for retirement now

There are very good reasons why it's usually better to start saving sooner rather than later. Take a look to see why.

 

Looking for advice?

Our advice is to get advice from a financial adviser. We feel so strongly about this that our products can only be bought through a financial adviser.

Find out more about getting advice

Find an adviser near you

Things to consider before you speak to a financial adviser

 

 

Your privacy is important to us - data protection

Our Data Protection leaflet tells you why we ask you questions, what we do with the information you give us and how we protect your privacy. It also explains your rights under the Data Protection Act 1998.