Unlike other types of savings plans, pensions benefit from tax relief. So for every 80 pence you put into a pension; the government will turn it into £1.
No strings or catches – just an easy way of making your money work harder for you.
Let’s look at an example for someone who pays basic rate tax.
- If you decide to contribute £100 each month.
- Because of tax relief, you only have to contribute £80 as the other £20 is made up of tax relief.
- Your employer agrees to match your contribution, so your £80 quickly becomes £200.
Of course, tax relief depends on your individual circumstances and could change.
You can make single contributions into your plan at any time. Any single contributions you make will benefit from tax relief – helping to boost your pension savings.
Remember that investment returns are never guaranteed. So while there’s a chance your savings could grow, their value can also go down. This means you could get back less than you put in.
You may be able to transfer pension savings from other pension plans. This could make it easier for you to keep track of them.
Transfer payments from one pension plan to another don’t receive tax relief. Transferring may not be in your best interests as you could lose valuable benefits which can’t be replaced. You should speak to a financial adviser before you make a decision.
Investing your pension savings
Your pension savings are locked away until you reach age 55 and invested to help them grow.
And the longer your money’s invested, the more time it has to grow. So the earlier you start saving, the better off you could be.
Of course, this isn’t guaranteed. So if your investments perform poorly, you could get back less than you started with.
Your retirement options
When you reach age 55, you can access your pension savings – even if you’re still working. And you’ll have three main ways to enjoy the money you’ve saved – buy a secure income, dip in when it suits you or take it all as cash. You can also take up to a quarter of your pension savings completely tax free.
Find out more about your retirement options.