Do I Need A Pension?
As we are all living longer and would like to enjoy our dotage in the most comfortable way possible, we must consider pensions as early as possible to a create a nest egg for our retirement.
A pension is designed to help you fund your retirement along with your home and any savings and investments that you may have. The government wants you to save into a pension plan and will incentivise you by offering tax relief if you do.
The State Pension averages at just under £100 per week, so if you want to boost your income in your retirement, you’ll need to consider your pension options. The younger you start saving into a pension plan the longer you will have to accumulate your retirement pot. However, it’s never too late to start saving and don’t be put off considering your options simply because you feel you have left it too late or that you believe it’s too complicated. Obtain financial advice and you may be surprised to see how much you could save by setting aside a certain amount each month.
Benefits of Saving for a Pension
A pension is simply another type of saving plan but they have a number of advantages to other saving plans because they are specifically designed for retirement. They are a tax-efficient way of saving and should form part of your retirement plan.
For every £80 you pay into a pension plan, the Revenue will give you basic rate tax relief of £20 meaning that your contribution will actually total £100.
The money in your fund will grow tax-free, however do remember that the value of your fund can go down as well as up depending on the performance of the fund.
Most employers realise the value of pensions and will invite you to join their group pension. This can reduce costs associated with saving into a pension plan. Moreover, they may pay into your pension plan as well and it is something that you will want to consider joining.
Access to Tax Free Cash in Retirement
If you have saved into a pension plan, you will be entitled to take up to 25% of the pot as a tax free lump sum at the age of 55 (dependent on the rules of your individual scheme). Therefore, the more you have saved, the more tax free cash you can withdraw from the fund.
Don’t underestimate the benefits of saving into a pension. The options are many and varied and you should seek financial advice to ascertain the best options for you.