As far as single Mums and Dads are concerned, pension options may seem irrelevant, particularly when living in the here and now means prioritising the welfare of your child. But in many respects, having an idea of your pension plans is even more vital for single parents, as often they don’t have the same financial support or stability experienced by couples. Below you will find a short guide to two of the most commonly used investment opportunities: equities and bonds. Both can be very profitable for people who hold a more flexible pension plan, such as a Self-Invested Personal Pension (SIPP).
Commonly referred to as stocks or shares, equities are effectively part ownership in a company. And chosen wisely, they can be an incredibly sound investment. In essence, the shares or ‘stakes’ controlled by equity holders change in value, according to the profits made by the company they hold shares in. If the company is seen to be making a profit, equity holders will experience a rise in the value of their shares. Likewise, if the company is faltering, so will the value of equity holders’ stock. In short, Equities present greater risks to the investor, but the payoffs can be significant.
Bonds are basically loans given to a government or company. In most cases, these loans will be given over a predetermined time period, with the owner of the bond receiving regular interest payments. On the plus side, the financial return on bonds can be two-fold; investors may see both interest gained through the loan as well as additional capital through the rise in the value of the bond. As with any investment though, there are risks. Most notably, bonds can be traded on the stock market, meaning that their value can rise and fall the same as equities. Similarly, a bond’s return could be affected if the interest or capital can’t be paid back in time or if the creditworthiness of the company is seen to fall.
A Comfortable Future
As a single parent, pension investment schemes may be the very last thing on your mind right now. However, it’s important to start thinking now about how you plan to invest what little excess money you have. After all, there’s nothing wrong with desiring a comfortable future for yourself as well as your child. And with a SIPP or a similar plan, you might just achieve that future through one of the investment options listed here.