DON’T TURN DOWN MONEY FROM YOUR EMPLOYER

When given the option to join a workplace pension, it is almost always a good idea to do so. Most employers are required to automatically enrol you in a workplace pension scheme, and you may be offered a pension plan even if you do not meet the criteria.

Workplace pension plans are made up of your own contributions (5% or more of earnings), which are deducted from your salary, in some cases before you pay tax, making it easier to save, and your employer’s contribution, which must be at least 3% of your qualifying earnings. Many employers provide more or match any extra payments you make, so it’s worth checking to see if you’re making the most of this valuable benefit.

DON’T SAY ‘NO’ TO EXTRA MONEY FROM THE GOVERNMENT

Anyone who chooses not to invest in a workplace or personal pension also declines government assistance. This is because, in order to encourage people to save for retirement, the government provides a supplement to pension payments known as ‘tax relief.’ The manner in which you receive this tax relief is determined by the type of plan you have and the rate of income tax you pay. However, if you are a basic rate taxpayer and contribute to a personal pension in the current tax year, you will receive 20% tax relief on your payments. So, if you pay £200 per month into your pension plan, the £40 in tax relief means it will only cost you £160. Higher or additional rate taxpayers may be able to claim even more.

Some workplace pension schemes provide tax relief in various ways, such as salary sacrifice or exchange schemes, so check with your employer if you’re unsure how this works for you. In addition, the tax relief details differ slightly in Scotland. But the general point is the same in all of these cases: every time you delay paying into a pension plan, you lose out on an extra boost.

Tomorrow we will look at 2 further simple rules to follow when planning your retirement, as well as the mistakes to avoid. Please contact us for more information on how we can help protect your future financial well-being and the options available to you.

A PENSION IS A LONG-TERM INVESTMENT NOT NORMALLY ACCESSIBLE UNTIL AGE 55 (57 FROM APRIL 2028 UNLESS PLAN HAS A PROTECTED PENSION AGE). THE VALUE OF YOUR INVESTMENTS (AND ANY INCOME FROM THEM) CAN GO DOWN AS WELL AS UP WHICH WOULD HAVE AN IMPACT ON THE
LEVEL OF PENSION BENEFITS AVAILABLE. YOUR PENSION INCOME COULD ALSO BE AFFECTED BY THE INTEREST RATES AT THE TIME YOU TAKE YOUR BENEFITS.