Sooner or later you’ll call it a day and retire! When this happens you will need to have income in one form or another for your retirement. That’s why it is vital to consider your financial position, including how you’ll clear any outstanding debts, while saving into a pension.
To supplement your State pension
- If you are fortunate you may be entitled to the full State pension when you reach pension age providing you’ve made National Insurance contributions for the minimum number of qualifying years.
Get tax relief on your income
- Within some workplace schemes your employer may take pension contributions from your pay before they deduct income tax. However when contributing into personal pensions and some other workplace pension schemes your pension provider will claim back income tax at the current 20% basic rate of tax and add it to your pension pot.
- This means for every £100 you contribute you add £125 to your pension pot. Higher and additional rate tax payers may claim further relief through their personal tax returns.
Get matched payments from your employer
- If you’re a member of a workplace pension scheme, your employer might agree to pay more into your pension if you do the same, usually up to a maximum proportion of your salary, but no less than 1%.
Auto enrolment makes it even easier to start a pension
- The government has made it compulsory for companies to provide their employees access to a workplace pension scheme. You’ll automatically be enrolled if you are at least 22 years of age, working in the UK and earning at least £10,000 a year.
Achieve the lifestyle you want in retirement
- It is difficult to estimate how much annual income you’ll need to live comfortably in retirement, but 50% to 60% of your salary is considered a good benchmark to aim for. This assumes you’ve paid off your mortgage and are debt free.
Start early, and reap the benefits
- Like most investments your pension will need time to grow, so the more you are able to invest early on will mean less pressure to increase your contributions later to meet your retirement goals.
#pensions #workplacepensions #autoenrolment #taxrelief
