Many people know that a pension is the financial safety net for when we eventually grow old. However, many people are confused about how much they should be saving – if at all. If you’re hoping to build a healthy savings pot for when you’re older, there are a few things you should put time aside for. The pension experts at Portafina created a list of things you need to pay attention to when starting and growing your pension pot.
Keeping a personal pot as well as an employer’s
Once you’re over the age of 22, you’ll automatically be enrolled in your workplace pension scheme if you earn over £10,000 – which saves you plenty of time! In total, your pension scheme will include the money you put it in, your employer’s contributions and tax relief, which will be equal to 8% of your annual income. By not signing up to this, there’s a potential to lose thousands of pounds for your pension pot.
When it comes to your personal pension pot, be sure to contribute to this regularly too. However, with both your own and employer’s pension pot, don’t feel you have to contribute the bare minimum – there’s no reason why you can’t chip in more.
Make sure you’re getting the best deal and advice
There are charges and low rates that could be hindering your pension’s growth, which you won’t know without a pension review. In fact, anyone who has had multiple employers will probably have multiple pension pots, all of which belong to them (regardless of when they were contributing) and these too could be susceptible to poor rates and charges.
A regulated financial adviser, like Portafina, can check your pension for you to make sure everything is in tip-top shape and let you know whether you could be better off in another scheme. Click here to find out about Portafina’s no obligation pension review. In fact, those who get pensions advice could have more in their pot than those who don’t. Having someone who is qualified to make the most of your pot will save you plenty of time.
The powers of the state
The State Pension won’t give you a particularly comfortable retirement, which is why it’s a good idea to check you’re receiving the full amount. Here’s what you’ll need to qualify:
- 35 years of National Insurance contributions consecutively or non-consecutively.
Missing any years in your contributions, known as gaps, may eat away at how much you receive. If you would like extra help or information, then be sure to contact Portafina, where their details can be found on their website and Facebook page.
However, the State Pension isn’t the only string to add to your bow, courtesy of the government. Another way to receive a bit of a financial boost for your pension is tax relief. Tax relief is a huge benefit for those receiving a pension: it’s claimed back from the government by employers and pension providers alike, according to the details of the particular pension scheme. However, if you are a higher or additional rate taxpayer, you may need to claim it using self-assessment from HMRC.
One last detail
There is a cap on what you can pay into your pension, known as the ‘pension annual allowance,’ which is £40,000 – and that’s everything coming from you and your employer; going over this receives a penalty. In order to avoid this, you can carry over your annual allowance from up to the three years prior, on the condition that your current annual allowance has reached its limit.
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