Why Pay Into a Pension?

Planning for your retirement is one of the most important things you need to do when organising your finances; here are just 5 reasons why ...

Reason 1

The pension you get from the state won't be paid until you are 65 (60 for women born before 6 April 1950). If you don't want to carry on working until you reach that age, you have to save for yourself, otherwise you won't have anything to live on.

Reason 2

Pension planning is all about saving now to buy an income in retirement. It is vital if you want to live on more than the basic state retirement pension and, for some people, the state second pension (S2P) which replaced the state earnings-related pension scheme (SERPS) in April 2002. How much you get of any type of state pension to which you are entitled depends on your National Insurance record during your working life.

Reason 3

Joining an employer-run pension scheme (if you can) is like getting a tax-free pay rise. This is because, by law, employers who run their own schemes must contribute to the scheme on your behalf. This is also true of employers who do not run their own scheme but offer staff access to a personal pension rather than a stakeholder pension.

Reason 4

Paying into a pension is the best way to save for retirement because for every £100 you pay in, the government adds a further £28 in the form of basic-rate tax relief (higher-rate taxpayers get a higher subsidy). And when you retire, you can take part of your pension as a tax-free cash lump sum.

Reason 5

The younger you are when you start your pension, the bigger the pension you can expect to get. Even if you can afford to put aside only a small amount, this is better than doing nothing.