It’s that time of year again. Pension Awareness Week is back for 2024, running between 9th and 13th September, and to celebrate our financial planning team RL Wealth have put together this seven point plan on why its best to save into your workplace pension!
Why you should save into your workplace pension:
- To supplement your state pension
While the State pension provides an income in retirement, currently (with a full state pension) you would receive £11,500 per annum and this may not be sufficient to support your desired lifestyle in retirement. Having a personal or workplace pension can significantly boost your retirement income, ensuring a more financially secure retirement. State pension age is currently 67, rising to 68 and by having a separate workplace or personal pension, it gives you more options as to when you can afford to retire, possibly without having to wait for your state pension.
- Tax relief on your income
Pension contributions offer great tax benefits. Personal pension schemes claim back income tax at the basic rate, effectively increasing your contribution. Higher and additional rate taxpayers can also claim further relief via personal tax returns, making it a tax-efficient way to save.
- Your employer pays a pension contribution
Your employer pays a percentage of your salary into your pension as an employer contribution, this is in addition to what you pay. This is essentially free money being added to your pension, making it a valuable additional benefit which if you choose to opt out of the scheme, you lose.
- Auto enrolment
The government has made it mandatory for employers to offer workplace pension schemes, making it easier for employees to start saving for their retirement. Employees meeting certain criteria are automatically enrolled into a workplace pension (over age 22 and earning £10k+ per year) but have the option to opt-out, though they will be re-enrolled every three years if still eligible.
- Greater pension flexibility at retirement
Since April 6, 2015, pension access has become more flexible. From age 55 (57 from 2028), you can choose how to withdraw your pension funds, whether through lump sums, drawdown arrangements, or annuities. This flexibility allows you to tailor your retirement income to suit your needs and circumstances.
- Achieve the lifestyle you want in retirement
Estimating your retirement income needs can be challenging but aiming for 50-60% of your pre-retirement salary is a good rule of thumb. This assumes you are debt-free and have paid off your mortgage by retirement. Pension calculators are offered by providers to help you determine the right level of contributions to achieve your retirement goals.
- Start early and reap the benefits
The earlier you start saving, the more time your pension pot has to grow. Early contributions benefit from compound interest, reducing the pressure to make higher contributions later in life. Thinking about pensions in your early twenties seems alien as retirement is so far off however starting early can make a significant difference to your retirement savings.
Do it now or regret it later…
Saving into a pension is crucial in securing a financially stable retirement. By taking advantage of tax relief and employer contributions, you can begin to build a pot for the future and by starting early and making consistent contributions this will help you to achieve the lifestyle you want in retirement.
For more help and support on workplace pensions and planning for your retirement contact our friendly financial planning team via email: wealth@robson-laidler.co.uk or phone: 0191 2818191.
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