Choosing your perfect pension

You might not have thought too much about your retirement. After all, for some of us this seems a long way off. That may be the case, but to really ensure you have the funds to enjoy those latter years there's no time like the present to make the important decisions to plan for your future.

For those in work, auto-enrolment is about to (or may have already done so) bring pensions to the forefront of the savings agenda, but what about those not working? Or those who are, but feel they need another layer to their potential pension funds?

If that sounds like you, there are many decisions you need to make. You may be weighing up the pros and cons of self invested personal pensions over stakeholder pensions; or you may have already decided on a SIPP, but are struggling to decide which of the many SIPP pension providers you should go for. Here's our quick guide to help you on your first steps to building a retirement fund.

Opting for a SIPP

A standard stakeholder pension has to comply with certain Government conditions in relation to charges, penalties, maximum payments and tax relief making them a good option for those who don't want to make any tough investment choices and who can't afford to make monthly payments or who have inconsistent incomes.

However, with the range of investment options available through a SIPP, for those comfortable enough to make important investment decisions this could be the best way to really secure your financial future come retirement.

SIPPs explained

A SIPP is a do it yourself pension scheme. What it basically boils down to is that you make all the decisions on how your funds are invested, rather than relying on your pension provider to do this on your behalf. This does require a little financial knowledge, but with a little financial advice you'll be able to build a rich and diverse investment portfolio.

The range of investments

This will depend on the provider you choose. For example opting for a self invested personal pension with top providers you'll have a market leading range of investments which includes more than 2,300 funds, shares, exchange traded funds, exchange traded commodities and permanent interest bearing shares, amongst others.

The tax benefits

When you make a personal contribution into your SIPP, it will be done so "net" of basic rate tax. In basic terms, this means that you will benefit from 20% tax relief on that contribution. For higher rate tax payers, there are even higher potential rates of tax relief upon completion of a self-assessment return.

Charges

This is one of the factors that tend to put people off choosing a self invested personal pension, however certain providers on the market offer a low-cost, transparent charging structure including discounts for regular investors and frequent dealers. If you envisage using your SIPP regularly for transactions and investments this could be the ideal option for you.

Choosing the right pension can sometimes appear a difficult process; but it shouldn't have to be.