Thread: Pensions
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Old October 10 2013, 08:14 PM   #7
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Re: Pensions

You're going to want something that gives you a broad range of investment options. Usually that means a wide range of mutual funds; some accounts give you direct access to stocks as well. Index funds are often a good choice because they have lower management fees.

You'll need to decide whether to make pre-tax or after-tax contributions. I don't know how it works in the UK, but in the US after-tax contributions are called "Roth". The difference is when you pay your taxes. If you contribute on a Roth basis, you pay your taxes now, but don't owe any tax on that money when you pull money out in retirement, even if it has increased 500% due to investment gains. If you contribute on a pre-tax basis, you are able to put more money into the account now (since you don't have to deduct taxes) but you'll owe normal taxes when you withdraw it. I'm no expert, but my feeling is it's usually best to contribute on a post-tax basis when you're young.
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