Making the most of your pension savings
Are you confident you’re saving enough to support the lifestyle you want in retirement? Put simply, a pension is a long-term savings plan which potentially grows over time and can be used to provide an income during your retirement. There are many benefits to paying into a pension plan:
Tax relief
Did you know that if you’re saving towards a pension between the ages of 18 and 75, you can receive contributions from the government on top of the amount you save?
This is because you receive tax relief on the contributions you are paying in: 20% for basic-rate taxpayers, 40% for higher-rate taxpayers and 45% for additional-rate taxpayers.
As an example, for a basic-rate taxpayer, for every £100 you pay into your pension, the government will top it up by £25 giving you a total contribution of £125. Higher and additional rate taxpayers can claim further tax relief through their annual self-assessment.
A top up on your salary
If your employer has a pension plan set up as an employee benefit, they will also pay contributions to your pension plan (up to a certain level). Think of it as a top-up on your salary.
Compound interest
When you save money into your pension you’ll hopefully make a return on the investment, subject to performance of course. The following year you'll hopefully get a return, not only on your initial investment but also on the return from the previous year, and so on. In this way, you would potentially be earning money on previous gains which are all added into your pension pot.
If you want to discuss your pension planning in more detail then speak to us and we’ll make a recommendation based on your individual circumstances.
The value of investments and any income from them can go down as well as up and you may not get back the original amount invested.
HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen.
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