I’m often asked, “where is the best place to save my money?” As you can probably imagine there is no one-size-fits-all and it will very much depend on your circumstances and what you are trying to achieve. However, for people yet to retire one product that can’t be ignored is a pension and let me explain why.
Forget the word ‘pension’ for a minute as most people think of it as some old fashioned thing that you pay into and it pays you a small income in retirement. Instead think of it as a savings account that invests into the stock market. From age 55 you will be able to access this savings account to do whatever you want. You may want to take it all out in one go or take money out gradually, the choice is yours. Every time you make a contribution the government will top it up by 25%. If you are contributing to a pension set up via your employer then it is highly likely that your employer will top up your contribution too.
Here is an example:
John’s employer has set up a pension scheme for him and they are happy to match what he pays in.
John is a basic rate taxpayer and decides to pay in £800 to his company pension scheme. The government immediately top this up by £200 so he now has £1,000 in his pension. Better still his employer also puts £800 in which means his £800 contribution has now become £1,800 immediately.
That’s a 125% return! What other investment/savings product can do that?
If John was a higher rate taxpayer he could claim back a further £200 from the government meaning his overall return would be 150%!
The above figures don’t even include investment performance which over the long term could mean a significant increase to your final savings pot.
Yes there are rules around when you can access your pension and you may have to pay tax when you decide to withdraw from your pension in retirement but whilst you are saving it is definitely a product to consider. So if you have opted out of your workplace pension scheme you may want to think again and if your employer has yet to offer you a workplace pension ask them why not, they should be, it’s the law!
If you would like further help understanding pensions and how much you can potentially pay in why not take advantage of our one hour free consultation? It may be all you need to get your retirement secured.
Risk warning:
Stock market linked investments and any income from them, can fall as well as rise and is not guaranteed. Any figures quoted are for illustrative purposes and should not be taken as a forecast or guarantee. Past performance should not be seen as an indication of future returns and clients may get back less than they have invested.
