Pensions are a crucial planning tool in securing your financial future. With generous tax benefits under threat, it’s never been so important to understand and maximise your pension benefits.
A pension is a tax-efficient type of investment plan that you contribute to (and if applicable your employer also) in order to build up capital over the long term – typically to provide an income for when you retire.
If this is something you’ve never looked into before, follow our five simple steps to ensure you can live out the future you deserve.
Check your state pension
Providing you’ve been paying National Insurance (NI) contributions during your working life, you’re entitled to State Pension. Information on how much you’re predicted to receive and when you can start claiming from can be found on the gov.uk website.
If you’ve reached the State Pension Age but feel that you are not ready to retire just yet, you have the option to continue working and delay taking your State Pension. Once you hit this milestone, you’ll no longer have to pay NI contributions. So by delaying withdrawing your state pension, coupled with the reduction of expenditure in the form of NI, you can boost your overall retirement income.
Pay into a workplace pension
If you’re working for an employer, utilising a workplace pension is a great way to enhance your retirement savings. This is because when you pay in, your employer pays in also.
This process should already be in place within your company, but if you’re unsure, it’s recommended to speak to your HR department. You may be able to contribute more into your workplace pension if you wish, and sometimes employers increase the amount they contribute too.
You should receive an annual statement telling you how much you’ve saved. Use this to help work out if you’re putting away to support the lifestyle you want to live out when you retire.
Start a private pension
If you’re self-employed, or if you simply want to save even more towards your future, then paying into a private retirement pension is a fantastic option.
At the moment (2020/21 tax year), the amount you’d receive as part of your State Pension is just £175.20 per week. Therefore, setting up a private pension significantly helps in building a larger pension pot for the future you desire. You’d currently be able to access your pension pot at 55 but this is being increased to 57 from 2028.
By setting up a private pension;
- Contributions receive tax relief, meaning the government will add money every time you contribute.
- Currently, when you reach retirement age, you can draw a 25% tax free lump sum, take an income, and also have access to further amounts of pension capital.
- Anyone can contribute – regardless of being employed, self-employed or not working. Other people can also make payments such as an employer, spouse or parent.
- Most are flexible and portable so if your circumstances change (eg. you start a new job or you stop working), you can still contribute to the same plan
- You can earn interest on your retirement savings.
Attempting to withdraw from your pension is very flexible with options of electing a regular monthly, quarterly, semi-annual or annual income as well as adhoc capital lump sum withdrawals.
Keep track of all your pensions
Very few people stay with the same company for the entirety of their working life, meaning you’re bound to have a number of pension schemes. As unclaimed pension savings are common in the UK, it’s a good idea to keep track of where your money is to avoid losing out.
Speak to a financial adviser
Speaking to a financial adviser is an important part of retirement and pension planning.
By offering a different approach to the complex area of pensions and retirement, keeping it simple and easy to understand, an expert adviser will steer you through the best private options for your needs, help you locate old pensions and ensure you are taking the right steps today to achieve the lifestyle that you deserve in the future.
The value of an investment with St. James’s Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.
The levels and bases of taxation and reliefs from taxation can change at any time and are dependent on individual circumstances.