Why save into a pension?

Retirement planning can seem complicated, but it is worth taking the time to understand how pensions really work. Otherwise, later down the line, you may not be in the right position to live the life you want to lead after you retire.

Early planning is critical nowadays

It can be hard enough deciding what you want for dinner, let alone plan you retirement! However, the simple fact is that most people in the UK aren’t saving nearly enough to give them the standard of living they need or want when they retire. Most people are entitled to the state pension, but this normally amounts to just over one hundred and fifty pounds a week. Then there is automatic enrolment – many people will make contributions to their workplace pension under the illusion that they will have enough income to achieve their objectives, without having checked or having a clear picture of what their retirement will look like. In reality, none of us really have a clue what we are doing about our retirement until we sit down with a qualified professional. The value of pensions and the income they produce can fall as well as rise, so you may get back less than you invested. Tax treatment varies according to individual circumstance and is subject to change. Transferring out of a final salary pension is unlikely to be in the best interest of most people. To ensure a more comfortable income you might need to top up your workplace pension or save into an additional private pension. Start now and the contributions are likely to be a lot less than a few years down the line.

Tax relief advantages of saving into a pension

There are benefits to saving into a pension. Essentially, a pension is a long-term savings plan with tax relief. The contributions you pay into your pension benefit from tax relief and aren’t subject to tax while they’re invested. Contributions are made up of your own money and some of your earnings, that would otherwise have gone to the government as tax, which is put into your pension pot. It is important to note that tax treatment varies according to individual circumstances and is subject to change. The Financial Conduct Authority does not regulate taxation advice, so Unividual is not authorised to advise on tax – this is what accountants do. However, what we do is ensure you do not pay more tax than you should. It is good to have a financial planner and accountant working together to achieve what you need. Whether you are in your 20s or 40s, don’t miss out on a tax-efficient way of saving.

How does a pension work?

Each person has a unique situation, set of objectives and circumstances, so the amount you need to save for retirement will be relative. Once you have identified these parameters with a financial planner you can start to regularly contribute to your workplace pension, or into a private pension. This pot will grow to provide you with an income in retirement. The value of pensions and the income they produce can fall as well as rise, so it is important to understand that pension planning is a long-term investment. Generally, you can access the money in your pension pot from the age of 55. When you retire, you can usually draw up to a quarter of your pension savings as a tax-free lump sum. If your pension pot is in a defined contribution scheme, you can then use the rest of the money as you choose. Unividual will give you a realistic understanding of what retirement funds you have now, and what you would need to do to retire on your desired income. Utilising a financial planner gives you accountability too, ensuring you are on track with your retirement plan and preventing any unwanted shocks or disappointments later on down the line.

How do I track down lost pensions?

Did you know that if you can’t find the details of an old pension you can track it down, free of charge, using the government’s Pension Tracing service? One of the benefits of working with Unividual is that we can help you with all that paperwork instead of you being left in the dark on your own. To find out more about pre-retirement planning, contact us today.


The FCA do not regulate auto-enrolment.

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