Every individual with a savvy financial sense knows that their investments in the right pension fund will contribute to their comfortable life after retirement. With a personal pension, you are making regular payments known as contributions into your chosen pension fund.
Your contributions will then be invested in a wide range of investment portfolio, such as stocks and bonds. You will then have a source of passive regular income upon your retirement, thus, lessening the need for active income from employment.
The trick is in choosing the right pension fund. With hundreds of providers in South Africa, this can be challenging for the beginner but it is possible with the following tips.
Do Comparison Shopping
Just because a pension fund was recommended by your family and friends does not necessarily mean that it is the best one where you are concerned. You have unique needs and wants – the amount of contributions you can make for several years, the amount of monthly pension you want in the future, and the type of coverage.
Be sure to compare the packages offered by several pension fund providers. Look at the fine print, such as the inclusions and exclusions. Ask for the key facts that can affect your pension in the future.
You can take into account the personal experiences of your family and friends with their respective pension fund. You must consider the reputation of the provider, too, including its investment portfolio.
Do Discuss Your Options
Each pension fund provider usually has several packages for their clients to choose from, such as basic or advanced packages. Be sure to thoroughly discuss the pros and cons of each package especially when the differences in contributions between packages are insubstantial.
Remember that you must make regular payments to the pension fund to secure pension payments upon your retirement or upon reaching a certain age. You will likely make minimum payments, which may or may not be affordable on your present income. You should consider your ability to make future payments especially when you have irregular income at present.
Don’t Go for Contributions Alone
Many people will choose the pension plan with the lowest contributions. You should consider that what you will get in monthly pension in the future will likely be commensurate to what you paid in contributions for the required number of years. Look closely at the contribution and pension matrix before making your decision.