Why choose a pension? - Because retirement should mean freedom and the chance to finally live your life as you choose.

Pension Simplification (or "A Day" as it is more commonly called) has finally arrived. On 5 April 2006 the rules governing how much you can contribute and what kind of investments are allowed for your pension have changed.

How will these changes affect you? Call us for tailor made, professional advice.

If you haven't already started saving for the future, you need to ask yourself an important question:

What will I live on when I retire? The quick answer might be the State Pension. But you'll need to consider carefully what it means to rely on state benefits. The lifestyle you can afford while working and what you could afford if you rely on a State Pension will almost certainly be vastly different.

The State Pension is there for support, but it is unlikely to offer you a comfortable lifestyle. What's more, the State Pension has to compete with other Government priorities - which mean increases in pension payments are unlikely to match wage rises, and have little chance of matching the growth in savings over the long term.

A pension is by far the most popular way to save for retirement. A pension carries a unique combination of advantages over other forms of investment, such as property, an ISA, or a bank or building society account. While some other investments may share the benefits of long-term growth potential, a pension combines this with an ability to spread risk across a variety of asset types. Plus a pension also provides a high level of ongoing flexibility and control. However, far and away the most attractive benefit of a pension is the tax advantages it offers over other forms of investment.

The Government wants to encourage you to build up your own retirement savings. When you pay into a pension, the taxman pays in your tax for you. So, if you are a basic rate taxpayer, contributing £78 will mean that £100 will actually go into your pension. What's more, you get tax relief at the highest rate of income tax that you pay. So for every £1 of higher rate tax you pay, you get higher rate tax relief on each £1 of pension contributions. In effect, the Government pays part of your pension for you.

Even without earnings, you can still contribute up to £3,600 each year, and get tax relief on that. And more of your investment growth goes to you because a pension invests in funds that are largely free from UK income tax and capital gains tax.

You don't just benefit when you pay in. When you retire, or whenever you choose to draw your pension, you can take a proportion of the fund, currently up to 25% for personal pensions, as tax-free lump sum. You can use this money in whatever way you want, and then use the remainder to buy an income for life. Because the tax benefits of a personal pension are so attractive, the Government limits how much you can pay each year, depending on your age and earnings. With a personal pension you don't have to worry about the complication of changing it when you change jobs. You can take it with you when you move jobs, and you can accept employer's contributions into your personal pension. And you can change from self-employed to employed status, or vice versa without needing to start a new pension. Life doesn't stand still, and neither do you. You're on a journey that will see you make new plans and commitments, meet setbacks and successes. So what's right for you today may not be right tomorrow. You need a pension that can change whenever you need it to. You may want to retire earlier, or even ease the change from work to retirement by opting to work less and access just a little of your pension. Or you may need to reduce, increase or even take a break from paying into your investment. A pension is a flexible investment that can adapt to the changes in your life.

Changes aren't just about personal circumstances. The world, the economy, the markets can also change, and so can the way you look at your investment. And who says you have to retire at 60 or 65? With a pension, you don't have to wait until a specific age to throw off the shackles and enjoy retirement - you choose when you want that to be. And if you want to carry on working into your later years, and keep your pension invested longer, you can do that too.

Most pensions are constructed to maximise the tax advantages offered, and to allow you more options for your retirement. Gone are the days when we all simply stopped working at retirement age. You may want to slow down, and work less, and you can if you wish draw on some of your pension early.

Personal pensions are open to anyone under the age of 75 - you do not even need to be working, as contributions can be paid into a personal pension on your behalf. There is the option to set-up a pension for your partner, a child or grandchild and fund it for them.

The earlier you start, the greater opportunity the funds you set aside will have to grow, and the less of your earnings you will therefore need to set aside. How large a pension fund you need to accumulate is down to your lifestyle, your hopes, your other commitments and other sources of income (ISA’s, property, cash savings and the like). An independent financial adviser can help you assess all the expenditure you should plan for in retirement and all the income sources you might have. You need to allow for inflation so the sum you are planning for has the same buying power on retirement, not simply the same cash amount. You will also need to plan for the increasing life expectancy - as the average life span grows, so does the need to fund for additional years in retirement. After all, you do not want a longer time to enjoy old age blighted by lack of income in later years.

How much should you save and why choose a pension:

The simple answer is, as soon as possible. Life expectancy is improving all the time, and most of us can look forward to a long and active retirement. This means that whatever you save needs to last longer than it did in the past. And that means saving longer, and saving more. Many of us are also choosing to retire earlier, which means that there's less time for our savings to grow. You need to decide when you want to retire, and what kind of lifestyle you want to enjoy. But then of course you'll also want to make the most of the tax benefits while you save. It's never too late to invest for your future. Whilst the investments in your pension can go up and down, a pension is designed to offer long term growth. So the earlier you begin saving, the better - the money you invest first has the longest time to grow. The earlier you start your pension, the more chance you'll have to enjoy the retirement you want.

Selecting your pension is one of the most important decisions you will make. The pensions industry in the UK is closely monitored to ensure every provider you do business with is reputable, and conforms to the strict legislation in place to protect you.

To find out more about how a Personal pension can help you plan for retirement, talk to your Family First IFA.

Click here to send an eMail request for advice on your Personal Pension

We are pleased to announce a new interactive facility to allow you to produce your own illustrations on line. Please use the facility but do not hesitate to contact us for personal service.

Click here for an online Illustration of your Pension plan.