Life Insurance or Pension?

[icelolly99]

Advice please; for the past 3 years I've 'only' worked as a casual/zero hours employee and therefore I am no longer paying into a company pension scheme. I do have a Life Insurance policy but am wondering whether the £40 p.month would be better invested in a private pension instead. Thoughts please? I'm in my 40's, my husband will have a good pension (hopefully!) and he has a life insurance protection policy through his employer. Thank you

It's not clear what you mean by life insurance - probably term assurance (or possibly critical illness) that only pays out if you die. So, that's of value if you have dependants who would need financial assistance if you die. Is that what you need?

A pension will provide you with something to live on when you retire. Are you otherwise planning to live off your state pension (and your husband's pension)? There are some tax-efficient reasons to pay into a pension, so you should definitely consider a personal pension. Once you reach 55, you can actually start drawing some of the funds from a pension.

The first rule of financial planning is protect the status quo, life cover, illness and income according to affordability.

Once you have this covered you can look to investing money in the most tax efficient means, ie ISA's and pensions.

Since the RDR changed to pensions in 2013 they have become less about pension income and more about passing on inheritance tax friendly amounts outside of your estate.

Do you have any dependents? If so shop around for life cover. Ideally you need both; you can’t guarantee that life won’t change in the future. Can your husband afford to pay some money into a pension for you?

You need to assess your financial future and plans as an individual and as a couple.

A pension is something which you save throughout your working life to provide yourself with an income when you retire and life insurance policy is something in which policyholder's family is financially secure for future, which also ensures that dependents are not left helpless fiscally-speaking in the aftermath of the insurance holder's death.

So, first of all, you will have to decide that what is the purpose of your investment? You can refer following guides to have a more clear idea:

en.samt.ag/retirement
www.bobatoo.co.uk/blog/life-insurance-vs-pension-plan/

I hope my answer will help :)