Pension Power: 5 key reasons to get you saving now…
Pension Awareness Day, Sunday 15th September 2019, is all about promoting people’s awareness of their pensions and saving for the future. Retirement can seem a long way off and people are often confused about what’s so good about pensions and how they work.
Donna, Octopus Personnel’s Payroll & Book-Keeping Manager, suggests why you should be paying into a pension, outlining five key reasons which can help you feel more confident about your financial future.
According to a report published by the Organisation for Economic Co-operation and Development, an average worker entering the UK workforce today can expect to receive less than a third (29 per cent) of their final working salary as a basic pension income after tax. This means that the State Pension alone isn’t likely to give you the lifestyle you’d hope for in retirement, as the basic State Pension is less than a minimum wage salary and the age when you can claim it is rising.
The number of people saving enough for a comfortable retirement has hit its highest ever level, with almost three in five Brits (59%) now saving adequately for the future. Unfortunately, however, the 15th annual Scottish Widows Retirement Report shows that the proportion of people not saving at all for later life remains static at 17%. Meanwhile, more than a fifth of UK adults (22%) – equating to almost eight million people – expect they’ll never be able to afford to retire.
With saving into a pension so important, let me guide you through some of the key benefits of a pension to help you get started!
1. Don’t go it alone – Workplace Pensions work for you!
A workplace pension is one where your employer has to contribute too, so if you haven’t signed up, you are effectively passing up ‘free money’. At Octopus Personnel, if you are over 22, have been working for 12 weeks or more, and are eligible, you will be automatically enrolled with NOW Pensions (click here for more information). Your contribution to your pension is listed below tax on your wageslip and the contribution made by Octopus Personnel is listed below that. Since 2012, more than 10 million people have been enrolled by their employer into a UK workplace pension and we recommend you join too!
2. Good savings habits quickly build!
As a workplace pension takes payments directly from your salary, you’ll quickly and easily be in the savings habit! Increasing the amount you put away even just a little each month could make a big difference to your pension pot in the long run. For example, if you get a payrise, why not put a quarter of the increase you are earning into your pension each month? That pot will keep growing!
3. The power of Tax relief
A pension is basically a long-term savings plan with tax relief. Getting tax relief on pensions means some of your money that would have gone to the government as tax goes into your pension instead. Tax relief is normally based on the rate of tax you pay. If you pay 20% basic rate income tax you get 20% relief, so it normally only costs you £80 to save £100 into your pension! How fantastic is that?
Should you pay higher rates of income tax, saving can cost you even less. However, not all pensions operate in the same way when it comes to how tax relief is delivered, so, if you’re in a workplace pension, you may want to check how it could work for you.
4. Pensions give you more choices and put you in control of your future!
Saving into your pension puts you in control and gives you a lot more choices without having to wait until your late 60s or longer to reduce your hours or give up work. How much you need to save will depend on how much you have so far, when you plan to retire and how much income you’d like to have when you stop working.
You can decide for yourself when and how you take your money, with much more choice and flexibility from a modern pension – which you can withdraw from once you reach 55. That means you can claim your pension money but keep working at the same time; take some or all of your money and retire; or you can choose to leave your pension savings untouched – or any combination of these options which works for you!
5. You can pass on your pension savings – sometimes tax free
You can nominate who you would like to receive your pension fund when you die, sometimes entirely tax free. Because pensions are not usually included within your estate, there’s normally no inheritance tax (IHT) to pay on savings in your pension. However, you must make sure you keep your beneficiary nomination form updated so your provider knows who you would like to benefit.
Ask for help
For more information, email the office at firstname.lastname@example.org or call 01747 825568. At Octopus Personnel, we are experts at supporting our candidates to ensure you are able to focus on doing the best job you can do.
Years of industry expertise, outstanding relationships with our clients, and grasp of the needs of their business, means we are perfectly positioned within the market to guide you to your new role, and support you once you are there. You can sign up here and call the office on 01747 825568 to arrange an interview. As one of the fastest growing recruitment and employment agencies in the South West of England, we are experts at ensuring that your skills, qualifications and personality match those required by clients. Come in and see us today!
Please note that tax and legislation may change and the information here is based on our understanding in September 2019 and shouldn’t be taken as financial advice. Your own circumstances will also have an impact on tax. As a pension is an investment it can go down and up in value and you could get back less than you paid in. You should always seek professional financial advice.
Donna Redwood, Octopus Personnel’s Payroll and Book-Keeping Manager