Ecclesiastes 11:2 – Give a portion to seven, or even to eight, for you know not what disaster may happen on earth.
Long-term goals are considered for years in the future. They’re usually substantial milestones, like your child’s university education or retirement, requiring focus and planning. Fortunately, an extended time horizon gives you plenty of scope to weather the ups and downs of the market and take on more risk. One key long-term investment is a pension fund. Some advantages of having a pension fund include:
- Financial safety net – A pension plan acts as a long-term savings fund, and this provides you with a pool of wealth that you can use to increase your financial stability, take care of debt, and manage your expenses.
- Leaving a legacy – Pension schemes can provide protection in the form of lump sums and pensions to dependents in the event of a member’s death. The payout from a pension plan can be done in two ways. The first is a monthly payment for the rest of your life that is equivalent to the total amount accumulated over the course of the plan, and the second is a lump sum payment that is paid in full to the policyholder. However, you have the choice of adding your loved ones as your beneficiaries so that they are taken care of if you are not around.
- Tax Relief – To encourage pension schemes, the government provides tax relief on contributions made to pension schemes and the growth in their investments. Pension plans count as tax relief items, and, therefore, the money you contribute to a pension plan is free from taxes. That means the wealth you have accumulated in your plan is entirely your own. These benefits extend further when you reach retirement age.
- Compounded interest – Pension plans offer you the benefit of compound interest rates the earlier you start, and this allows you to build up quite a healthy pool of wealth by the time you are ready to retire.
- Policy flexibility – The flexibility of a pension plan allows you to adjust the plan based on your current circumstances. If you are switching jobs, going through a period of unemployment, or would simply like to pause your payments temporarily, you may notify your financial advisor or pension plan provider and have your plan adjusted to suit.