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Saving tips for 2012
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What’s the difference between savings and a pension scheme?


What’s the difference between savings and a pension scheme and which is more important?

"Both are important. Without a pension, you won't be able to retire and maintain the sort of lifestyle you want." Says Standard Life's personal finance expert, John Lawson.

"Many younger people put off saving in a pension because retirement is too remote.

"But starting to save as early as possible is the best thing to do because there is a compounding effect that increases the longer you save - think of this as getting interest on your interest rather than just interest on what you have saved."

"Saving up for shorter term targets such as school fees or a new car is much better than borrowing money to fund these things, because you pay a lot more when you borrow due to the interest you have to pay.

"The main differences between the two are that short term savings are accessible whenever you need them – unless you choose a notice account or a fixed rate bond - and pensions can't be accessed until you reach age 55 at the earliest.

"However, to encourage you to lock your money away and provide for your retirement, the government gives you 25p in tax relief for every £1 you save in a pension."

Unlike savings accounts, with a pension it's not just you who contributes - your company or the government also contribute - it's almost like extra pay!

"A pension scheme involves the individual placing a certain percentage of their wages into a pension every month and the state or organization that they work for also contributes to this." states Frederic Nze, CEO o0k Oakam.

"It’s important to have a combination of the two so if you spend your savings, you will still receive income through your pension when you no longer receive income through employment."


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Article Plan Saving tips for 2012
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