Did you know that for every £1,000 contribution you make to your personal pension, the government automatically adds another £250, giving you £1,250 in your pension pot?
And if you are a higher-rate tax payer, you could claim back extra money through your tax return giving you an even better deal.
One in seven people retiring in 2014 had no personal pension provision leaving them to rely on the State Pension alone. To retire at 65, it is generally assumed you’ll need around two thirds of your salary.
To figure out how much you should be saving – take the age you start saving, divide it by two and use this figure as the percentage of salary you should be saving. So, if you’re 30, you need to save 15% of your earnings to enable you to retire with a pension equivalent to two thirds of your salary. If you’re 50, the percentage contribution needs to be 25% of your earningsThe earlier you start to save, the less it will cost you to build a decent pension pot.
A workplace pension could really give your pension pot a boost. By 2018 ALL employers will have to offer and contribute to a pension on behalf of their employees.
Private sector workers who have opted out of company pensions or are just contributing the minimum could be missing out on ‘free money’ as many employers will match contributions above the minimum levels.
Do you know how much your pension pot is worth? Do you even know where it is invested? Research shows that almost three quarters of pension savers under the age of 45 have no idea of the value of their investment. You could be losing out if your pension pot isn’t invested wisely.
For less than the cost of one Starbucks per week, you could make a really positive impact on the value of your pension pot. If a 30 year old contributes £150 net per month to his pension and increases that contribution by just 5% (£7.50 a month for the first year), by the age of 65 he could have an extra £190,536 in his pension (assuming he gets basic rate tax relief and the fund grows at 4% a year after changes).
The above is just a projection, showing values in cash terms without considering inflation which could reduce the value of money over time.
On average a British worker will have 11 different jobs over their working life. It can be hard for someone to keep track of all the pension schemes they have joined during their career. In the last 10 years alone, around £500 million has been tracked down. Your share of this could make a significant difference to your prosperity in retirement!
Following changes to retirement rules, if you’re aged 55 or over, you will have a lot more “pension freedom”. You can take lump sums, income, or a combination. You can even take your whole pension pot as cash in one go. 25% of your fund is usually tax free, and the rest will be taxed as income.