Are you looking for the best pension?

If so, negotiating the pensions minefield can be tough. With a wide choice of different pension schemes, many of which can be complicated to understand, it’s no surprise that increasing numbers of Brits are failing to make sufficient provision for their retirement.

Here are four top tips for finding the perfect pension.

Consider all the options

Before you commit to any pension it is crucial that you consider all the alternatives. There are several different types of pension some or all of which may be suitable for you. These include:

• State pension – If you pay National Insurance contributions then it is likely you will build up an entitlement towards a State Pension. However, at just over £100 a week, relying on the State Pension alone may be insufficient for your lifestyle.
• Employers pension – Most employers pension schemes are ‘defined contribution’ arrangements where your employer tops up your pension contributions. This boosts the size of your pension pot when you retire. Most defined contribution pensions allow you to choose from different investment options and the size of your pension pot will depend on the performance of these investments.
• Personal pension – If you’re self employed or your company does not offer a pension scheme, you can normally set up a personal or stakeholder pension. Your employer will not usually contribute to your private pension but your pension provider will claim tax relief at the basic rate of 20 per cent and add it to your fund. If you are a higher rate taxpayer, you can also claim an additional tax rebate to your pension pot.
• Stakeholder pensions – Stakeholder pensions were introduced in 2001 to make pensions cheaper and more accessible. They have lower fees and clearer terms but the investment options tend to be more limited.
• Self-invested personal pensions – Self-invested personal pensions (SIPPs) allow you to choose from a wide variety of different assets to invest in rather a small selection of funds. SIPP charges are higher than stakeholder and personal pensions and generally only suitable if you are a sophisticated investor or if you have a large pension fund.

Risk v return

When selecting a pension, one of your main choices will regard the level of risk you are prepared to take with your investments.

With a wide choice of funds you can choose to invest in relatively safe balanced funds or more risky funds that are based in emerging markets or made up from smaller companies.

Many investors reduce the level of risk they are prepared to take as they approach their retirement date.

Seek advice

One of the best tips when searching for the best pension for you is to seek advice.

Pensions don’t appear in the ‘best buy’ sections of newspapers or websites as they are complicated products that need to be tailored to your individual needs.

Seek advice from an independent financial advisor (IFA) or pension specialist. They can talk you through your various options in order to find the perfect retirement solutions for your needs.

Beware of the costs

Whatever type of pension you choose, make sure you understand the fees and charges before you sign up. For example, stakeholder pensions tend to offer lower charges (which mean more of your money is invested) but may not offer a wide range of investment options.

At the other end of the spectrum, a SIPP can offer a wide choice of assets in which to invest but you may pay much higher fees to the SIPP company and for someone to manage your pension fund.