Six reasons to pay your pension some attention

id

Many people find that their pension plan is one of the most valuable things they own – and something that could make a huge difference to their future. We look at why pensions deserve some attention – and cover a few pension basics in the process.

Reason 1: Your employer pays in too

Assuming you’re over 22 but under the State Pension age (currently 66, rising to 67 by 2028), and earning at least £10,000 a year, your employer usually needs to set up a pension plan for you. This is known as auto-enrolment.

At least 8% of your ‘qualifying earnings’ (a portion of your earnings) needs to be paid into your pension plan. Normally, your employer needs to pay at least 3% of this and a minimum of 5% needs to come from you. Some employers are willing to pay in more, and some may even match what you pay in up to a particular percentage. So it’s worth checking to see what’s possible.

Reason 2: You can get an extra boost from the government

If you’re under 75, the government gives you tax benefits on payments you make into a pension plan. 

How you get these tax benefits and how much you get depends on what type of pension plan you have and which tax band you’re in. Tax bands and rates can vary depending on where you live in the UK.

Some people pay into their plan after they’ve paid tax, and they get something called ‘tax relief’. Here’s how it normally works. When you put money into a pension plan, your pension provider claims back some or all of the tax you’ve already paid on that amount and adds it to your plan, giving it a boost. But your provider only claims back tax from the government at a rate of 20%. So if you pay more tax than this, you need to claim the extra back yourself. You can do this through a self-assessment tax return or by contacting HMRC. 

Visit MoneyHelper for more information, including how much tax relief you can get.

Some types of pension schemes (for example, salary sacrifice or salary exchange schemes) offer tax benefits in a different way to what’s described above. In these cases, you pay into your plan from your salary before you’ve been taxed. You’re then taxed on your salary minus your payment into your plan, so the benefit is that you pay less in tax and National Insurance on your salary. To find out if your plan works this way, you could ask your employer.

Reason 3: 25% is usually tax free

You can normally take up to 25% of your pension plan tax free from the age of 55 (rising to 57 from 6 April 2028).

So you get tax benefits while you’re paying in, and then you can get money tax-free when you take it out. So pension plans are a tax-efficient way to save for the future.

Reason 4: Time is on your side

Money paid into a pension plan is invested, meaning it has the potential to grow over time. Paying into a pension plan earlier in your career means that your money could be invested over decades. Through something called compounding, you may get returns not only on the money you invest, but also on growth achieved in previous years. You can find out more about compounding in our article. 

Even if someone were to increase their regular pension payments only slightly, the effects of compounding could still make a big difference over the years.

Keep in mind the value of investments can go down as well as up and could be worth less than what was paid in.

You can check our pension calculator to find out how much you might have in your plan in future.

Reason 5: Your investments are important

Your pension investments can play a huge part in potentially boosting the value of your plan over time. So it’s important to regularly review them. 

Paying attention to your investments doesn’t necessarily mean you need to become an investment expert. There’s usually a ‘ready-made’ investment option available, sometimes known as a ‘lifestyle profile’. Experts will gradually and automatically move your money into carefully selected funds based on how close you are to your retirement date. The investments may be geared towards one or more of the ways you can take money from a pension plan. 

Or if you feel confident with investing, you usually have the option of choosing and managing your own.

Either way, do check that you’re comfortable with the amount of investment risk you’re taking, and check that your investments match up with your goals for retirement. You can usually do this online or on your provider’s app. To find out more about Standard Life’s online services, visit our website. Or check our support page for FAQs and ways to get in touch. 

Reason 6: Your pension belongs to you

Your employer and the government may help boost your pension plan. But you typically get to make choices about where your money is invested and how much you pay in. And you can tell your provider who you want your money to go to when you die. Although they’re not bound by your wishes, they can take them into account. 

Normally, from age 55 (rising to 57 from 6 April 2028), you can start taking money from a pension plan. And there are usually different ways you can choose to take your money. These include taking a flexible income (‘drawdown’), using your pension savings to buy a guaranteed income for life (an ‘annuity’), or taking lump sums. You could go for a combination of options. You can find out more about the different ways to take your pension money on MoneyHelper. We recommend you get guidance or advice before making any decisions. From age 50, you can get free impartial guidance from Pension Wise, a service from MoneyHelper. Visit Pension Wise or call 0800 138 3944. It's important to shop around. Other providers may offer a higher level of retirement income, and different options more suited to your individual circumstances. 

MoneyHelper also has information on getting financial advice. 
 

Overall...

There you have it. When you’ve got a pension, getting to know how it works could help strengthen it over time – and help you feel financially fitter in future.

It's Pension Engagement Season 2025

We’re proud to sponsor Pension Engagement Season, which is all about getting people to pay their pension more attention. So use these three steps to help you feel more prepared for your future. 

id

The information here is based on our understanding in September 2025 and shouldn’t be taken as financial advice.

A pension is an investment, the value can go down as well as up, and you could get back less than you paid in.

Your own personal circumstances, including where you live in the UK, will have an impact on the tax you pay. Laws and tax rules may change in the future.