The importance of pension funds

Obviously our first love over at Winzum is running sumptuous online competitions for you lovely lot to enter and (hopefully) win, but we’re much more than just a one trick pony! In many ways we like to think that everybody is a winner with Winzum, and that’s why we put so much effort into spreading as much knowledge as we can.

One thing that not enough of us think about until it’s too late is the world of pension funds, an area in which you admittedly have to look a long way into the future in order to truly appreciate. But you could be shooting yourself in the foot if you haven’t thought about the importance of pension funds. Why not make it a New Year’s resolution [2021: how to make this new year count]?

I’m only young, why do I need a pension fund?

It is tempting to ignore the need for a pension fund when you are young, especially when you find that your pension payments are eating away at your monthly pay package. But here’s the thing: the earlier you start a pension fund, the earlier you will probably be able to retire!

Sure, it can be annoying putting money away in a pension fund that you won’t be able to access for several decades, but it will all become worth it when you are approaching the age for retirement.

Benefits of paying into a pension fund

If you are trying to save money in the long term, a pension fund is great because it effectively locks you out of it, however this can cause complications if you are only saving for the short term. There’s more short-term money saving advice from us here [a few of the best ways to save money].

Aside from the strict emphasis on saving, paying into a pension fund will also result in tax relief, which means that the government will take some of the money you would have paid in tax, and top up your pension with it. Additionally, a pension fund can do wonders for people’s peace of mind, as they know they won’t have to rely on a tiny state pension.

How to start a pension fund as a self-employed worker

If you are directly employed by a company the chances are that you are already paying into a pension fund each month, something that tends to happen automatically. Moreover, some extra friendly businesses will provide a pension top-up each month too, which is pretty fantastic if you ask us.

For self-employed people, however, the process is a bit more complicated, although not impossible by any means. In these cases people must open up a personal pension, in which you have a bit more flexibility on how and where your money is invested.

Some of the best pension funds

Here are some of the best pension funds to take a look at:

1. NEST: NEST Pension is the official government workplace pension scheme, and it can also be used by self-employed workers. It is low-risk, however also low-return.

2. Legal & General: Legal & General are one of the most famous pension providers, and have been known to make very astute investments that can do wonders for your pension fund.