Pensions have many huge advantages that make them a powerful component of retirement planning. Not only are there opportunities to boost the size of your pension pot using tax relief, but in 2019-20 your defined contribution pension(s) is also not counted as part of your estate for inheritance tax purposes (allowing you to pass the money on tax-free).
If you’ve ever watched Dragon’s Den, you’ll have noticed that Peter Jones, Touker Suleyman and the other investors look to invest in multiple companies. Each show might focus on a handful of investment opportunities, but looking at each of the Dragon’s investment portfolios as a whole, each one would feature multiple companies and asset types.
Whether you have been investing for a while or are just starting out, the fluctuations of the stock market can be a frightening thing. Cash can be comforting in comparison; its value is somewhat predictable. Yet in today’s world of low-interest rates, you’d be lucky if your cash managed to beat inflation. Realistically, to generate any meaningful investment returns in 2020 you need to look beyond cash to other asset types, which inevitably carry greater risk.
It’s natural to think of debt as a terrible thing which should be eradicated as quickly as possible. So when young people are asked whether their student loan should be paid off early (perhaps using a lump sum from an inheritance), many automatically assume they should do so. Yet is this really the wisest use of your money?