Pensions should be top of agenda

If you think you will never grow old, be certain that only sudden death could prevent this. You can also be certain that you will live of cat food and biscuits by the time you hit 70.

So discussing pensions might not seem to be the best topic at the moment, but warns Maike Currie, personal finance specialist at the Investors Chronicle magazine in London, it is something you will have to face up to sooner rather than later.

Currie says “most of us believe that we are still way too young to worry about pensions, and tend to push this to last of our agenda. However, saving towards your retirement is probably the single most important financial step you need to take.  Don’t expect to live off what the government gives you in your old age. State pensions, both in the UK and South Africa, are laughable and won’t even cover the grocery bill.

“UK pensioners receive around a paltry £80 per week to live off.  So to avoid a diet of cat food and tinned sardines, start pension planning now. First off, if your company offers you the option of a personal pension plan – take it! Often the company will contribute the same – or double – the percentage which you contribute out of your monthly salary. As a general rule – and if you can afford it – opt for the maximum contribution possible, you’ll be surprised at how much you need to put away each month to enjoy a half decent retirement. If you’re worried about what will happen to your UK personal pension when you go back to SA, ask a financial adviser about QROPS – Qualifying Recognised Overseas Pension Scheme, under which you will be able to transfer your pension to a qualifying scheme in South Africa.  Visit www.hmrc.gov for a list of pensions in South Africa, which are QROPS compliant.  

“If you do not have a personal pension plan but you are working – you are probably making NI – National Insurance contributions.  If you have paid enough NI contributions you will automatically be entitled to the State Pension - known as the Second State Stakeholder pension. The catch is that if you leave the UK, chances are you are probably going to  lose the NI contributions you have paid, and your chances on claiming a state pension. The solution – set up your own personal pension plan through a life insurance company – there are many in the UK – and choose opt out of the second state pension, asking that your NI contributions be redirected towards your personal pension plan. Do this as soon as possible because from April 2012 there will no longer be the option of contracting out,” says Currie.