31 March 2016

Saving for your pension: which solution should you choose?

Will your statutory pension be sufficient to maintain your standard of living? If not, now is the time to start saving. You have a number of options, including pension savings funds, pension savings insurance and long-term savings. The best solution for you depends on your personal circumstances and your goals.

Some examples
  • Do you want maximum protection for your capital? Pension savings insurance or long-term savings may be right for you: the capital is protected and the return is guaranteed.
  • If you have your eyes set on a higher return and you are prepared to take more risks to achieve it, a pension savings plan maybe something for you. The returns are typically much higher than a pension savings insurance. In many cases, legislation provides for several mechanisms designed to limit you capital risk.
  • Are you currently paying back a mortgage? Then you should opt for either a pension savings fund or pension savings insurance. In so doing, you will be able to benefit from a tax advantage on both your home loan and your pension savings. The combination of home loan and long-term savings is less advantageous, because in that case, you will only receive a tax incentive for your home loan.
  • In the case of long-term savings, you can deposit higher amounts each year and thus potentially save even more in tax. This tax reduction is not applicable if you already have a mortgage.
So what do I need to do?

Firstly, estimate what your financial needs will be when you retire. Then carefully analyse the features of each savings solution and choose the one that best suits your personal circumstances and goals.