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There has been so much negative press about pensions over the last few years you might be confused about the best option for you and whether you need a pension at all. While we cannot tell you what the right choice is in your individual circumstances we hope we can make things a little bit clearer.
The main reason to save into a pension is simply because the basic State Pension is below the amount that most people hope to retire on at a current rate of £115.95 per week. It’s a good start but more than half of the UK population are either not saving at all or not currently saving enough achieve their expected standard or living.
If you fall into either of these categories you might have to adjust your living expectations or retire later. The alternative is to start saving more.
Why a Pension?
If you decide to start saving more there are numerous benefits to a pension over other savings options. Think of a pension as a long-term investment with added tax relief. As you contribute your savings grow and this will provide you with the extra retirement income you need. In most cases you can access this money from the age of 55.
Tax Relief and Top-ups
Any money you save into a personal pension scheme is eligible for tax relief. In practice this means that money you would have paid in tax is now added to your pension.
While many employers already paid into pension schemes for their employees it is now increasingly required for workers to be enrolled into a workplace pension scheme. This will soon be compulsory for all employers and is known as automatic enrolment.
If you have access to such as scheme and your employer will also contribute it is in your interests to make the most of the opportunity. In some instances your employer will match your contribution up to a certain level and this is a great way to get your pension pot started.
To find out more about automatic enrolment see this article from the Money Advice Service.
If you are unsure about your pension options speak to your employer or you can get impartial advice from Pension Wise.
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