1. Something is better than nothing
Everyone talks about starting a pension plan. And yes, the younger you start the better, but it’s never too late if you didn’t start it early in your career.
The Government workplace pension scheme is designed to help eligible workers. If you haven’t heard about it already, speak to your employer.
2. Understand your allowances
Annual allowances
The annual allowance (the amount you can put into your pension each year) is £40,000 per year and for high earners as little as £10,000.
You must ensure you don’t exceed this annual allowance each year, otherwise you will need to pay an additional amount of tax to HMRC.
Lifetime allowances
Lifetime allowances have slowly been decreasing, however you could accumulate money quite quickly due to growth. The lifetime allowance is £1,055,000, which sounds like a lot of money, however could cause tax problems for some.
3. What is pension freedom?
Pension Freedom was introduced at the start of the 2015/16 tax year, giving you more control as to how to use your pension fund.
With access to a lifetime of savings, you may see it as the perfect time to treat yourself to a holiday of a lifetime or that car you’ve always wanted. However, by doing so could mean you don’t have any money to give you an income in retirement. State pensions are only designed to pay for basic needs, so without a guaranteed income it will be a lot easier to run out of money.
Income drawdown
At retirement you can access the money in your pension to help provide you with an income. With pension freedoms, the world is your oyster, you can do what you want with your money. However, you need to remember why you spent a lifetime saving – to give you income for the rest of your life. You could buy an annuity, this guarantees the income for the rest of your life, but you have no control. Or you could keep the money invested and have control over how and when you access income.
Pensions are more complicated now, so you may want to seek Independent Financial Advice. If you’d like to discuss your retirement options, call us on
and a member of our team will be happy to help or alternatively…
This article is for information purposes only and is not personal advice. It is based on our current understanding of legislation and HMRC guidance which could be subject to amendment. It is correct as of February 2019. You should always seek financial advice. The value of your investment can fall as well as rise and is not guaranteed. You may not get back the full amount invested.