Pensions and pension options
There is a cliché that no one at the Bar ever retires. Whilst this is true for some people and may be true in your case, the reality is that when you get to retirement age, you will want to have the choice of whether to continue, to reduce your hours or to stop work completely. In order to give yourself this choice, you need to start saving and the earlier you start the less per month you have to save to ensure a decent income when you get older.
It is not essential to save everything in a pension wrapper – the important thing is that you save. If you are between 20 and 30, you should be looking to save at least 10-15% of your income, whether this is in an ISA, investments or a pension.
The disadvantage of a pension is of course that you cannot access the money until you reach retirement age. Whilst this may be off-putting, bear in mind that it is also an advantage: there will be no option and therefore no temptation to take money out of this savings pot to pay for short-term costs.
The main advantage of pensions over the other savings options is of course the tax advantage: if you’re under 75, subject to an annual allowance, all the tax you’ve paid on the money you contribute to your pension is paid by the government as an additional deposit into your pension pot. So, for example, if you are a basic rate taxpayer and pay £80 a month into a pension, the government will contribute £20 and your pension pot will receive £100 a month.
For pensions providers, we recommend that you consider the Bar Council’s recommended service partner (http://www.barcouncil.org.uk/supporting-the-bar/explore-member-benefits/) for financial advice, planning and pensions advice. Be aware that these providers will charge for their services and this may be expensive. Free impartial guidance is available from experts at The Pensions Advisory Service (http://www.pensionsadvisoryservice.org.uk/). Although TPAS won’t advise you on what pension to get, they are a very good jargon-free source of information about the options available.