Boost your pension

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Your pension wake-up call

Paying more into your pension may not necessarily be top of your to do list. It’s tempting to think it’s something you need to worry about in the future.  If you’re relying solely on your pension to fund your retirement income, are you confident you’re saving enough now before it’s too late?

Small changes can lead to big results

By cutting out a few small things from your lifestyle, such as takeaway coffee or unused subscriptions, you could free up money for your pension.

If you’ve just paid off a loan or credit card, why not put that extra money into your pension each month before you miss it?

Pensions are a tax efficient way to save for retirement as tax relief boosts the money you pay in and helps your fund grow. The taxman adds £1 for every £4 you contribute to your pension if you’re a basic rate taxpayer.

Take a look at how it can really add up

You pay each monthThe taxman addsMonthly pension boostAnnual pension boost
£80 £20 £100 £1,200
£150 £37.50 £187.50 £2,250
£300 £75 £375 £4,500

 

What’s more, if you’re a higher rate taxpayer you’ll also get further tax benefits through your tax return.

The value of tax relief could change depending on your individual circumstances. The figures above are based on our understanding of tax rules in April 2014 and they may change in the future.

Surprisingly flexible

You may not be aware exactly how flexible your pension is. It’s designed to adapt to your changing needs. You can also manage it online, just like a bank account.

  • Change your monthly payment
    You can adjust the monthly amount you pay in by logging into your plan online or with a phone call. You can choose to pay more when you can afford it or reduce it when you can’t.
  • Make a one-off payment
    You can make single payments into your pension. If you receive a windfall such as a work bonus or an inheritance, you should consider investing it in your pension.
  • Keep your payments on track
    You can really boost your pension by choosing to automatically increase your pension payments each year, say by 3-5%. This keeps your payments in line with inflation without you having to worry about it. You could even consider a larger increase if you receive a pay rise.
  • Change your retirement date
    The longer your pension fund is invested, the more chance it has to grow.  You can change your retirement date at any time to suit your needs. As with any investment, the value of funds can go up or down and may be worth less than you paid in.
  • Manage your investments
    You may be happy to take more risk when you start a pension but become more cautious as you approach retirement. You can review your pension investment choice at any time by logging into your plan online.

Need to think again?

It's easy to find reasons to put off paying more into your pension. Some of the reasons below may sound all too familiar, click on them to see if you need to reconsider your approach.

The Government will look after me

My house is my pension

I'm waiting for my inheritance

I'm hoping I’ll have enough

I need to keep control of my savings

I can't commit to paying for long periods of time

I'll start later

I'm feeling lucky!

What to remember

Whatever you do to boost your pension, there’s a few key points you should bear in mind when making decisions:

  • You normally can’t take your money out until you reach the age of 55. Don’t let this put you off – think of all the top-ups you’ll receive from the taxman over the years that will be paid into your pension.
  • If you exchange salary in return for a payment from your employer to your plan, you don’t get tax relief on that payment. But you do save tax on the salary you have sacrificed.
  • If you’re a higher or additional rate tax payer contributing £80 into your pension, your tax will be reduced by a further £20 or £25 as appropriate (subject to the amount you earn).
  • The information provided is for explanation purposes only. As with any investment the value of your fund can go up or down and may be worth less than what was paid in. Laws and tax rules may change in the future. The information here is based on our understanding in April 2014. Your personal circumstances also have an impact on tax treatment.

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