Why should I save into a pension?
A pension is a way of saving for the future. There are pension benefits and incentives such as:
- Tax relief on contributions
- Tax free growth
- Tax free cash
- Tax free death benefits
It is a question we are repeatedly asked. Put simply, a pension is a financial product into which contributions are paid with the aim of providing money for when you retire.
Broadly speaking these will be either personal or private pensions for individuals and company or workplace pensions for employees.
Most people in the UK will also be eligible to receive a State Pension according to the number of years that a person has paid National Insurance (NI) contributions.
A pension is a way of saving for the future. There are pension benefits and incentives such as:
We all enjoy tax savings. The contributions that you make into a pension benefit from tax relief. Everyone receives basic rate tax relief at a rate of 20%. Higher rate taxpayers are eligible for tax relief at 40% and additional rate taxpayers at 45%. Put simply, the government will top up your pension contributions which makes pensions great for tax efficient investing for retirement.
In 2015 there was a complete overhaul of Pension Legislation with the introduction of Pension Freedoms. It is now possible to withdraw any amount of your pension at any time from age 55 (57 from 2028). This offers great freedom and choice to clients, but the flexibility that Pension Freedoms provides does also bring about complexity. It is more important than ever before to receive pension advice from a qualified financial advisor.
Pensions can be confusing, but they need not be. At Bigmore Financial Planning we have fully qualified financial advisors that can advise you on all types of pensions and guide you towards your retirement goals.
There are two main types of Company Pension. These are Defined Contribution (Money Purchase) or Defined Benefit (Final Salary) schemes.
You can choose to receive a pension when you reach a pensionable age, the earliest of which is 55. You will usually have the option of delaying your pension, in return for higher payments later on.
When you retire, you can do several things with your pension pot(s). You can firstly take a 25% portion of the money out tax-free, with the rest being left to grow – known as drawdown. You can then take money out of this pot to fund your lifestyle or use it to buy an annuity (a regular income) – this money is taxed according to your overall income.
Alternatively, you can invest the whole amount in an annuity, with the first 25% of each payment being tax-free, or keep the whole amount invested, with each withdrawal being tax-free at 25%.
You have worked hard. You deserve to enjoy your retirement. It is important that you plan early and save enough to be able to enjoy your later years. Pensions play a big part but may not be your only savings and source(s) of income.
At Bigmore Financial Planning your financial adviser will work closely with you to fully understand your current situation and financial and life goals. Your adviser will take you on a financial planning journey and provide the advice and recommendations to help you make informed decisions throughout. Your adviser will implement the plan and regularly review this with you.
Bigmore Financial Planning will provide the helping hand to support you in achieving your goals.
Please note: The Financial Conduct Authority does not regulate tax advice.
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Pensions can be confusing, but they need not be. At Bigmore Financial Planning we have fully qualified financial advisors that can advise you on all types of pensions and guide you towards your retirement goals.
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