Workplace Pensions for Beginners
Most people in the UK will have some sort of pension. Pensions are a way to save money for retirement and one of the most tax efficient ways of securing your financial future for later in life.
There are three types of pension you need to know about: workplace, personal and state pension. Your workplace pension is a scheme managed by your employer on your behalf to help you save for retirement.
With a workplace pension, contributions are taken from your salary, and topped up by your employer. Anything that comes off of your salary will also be given as tax relief, meaning money you would have paid as tax will go into your pension pot, for you to enjoy later in life. The money you put into your pension will be invested on your behalf, with the aim of boosting the final value of the pension by the time you come to collect it.
This makes it a shrewd way to invest for your future, as it reduces the amount of tax you have to pay while you’re working, while also giving you the potential to enhance the pot through an investment benefit known as compound interest which you can read more about here.
When the time comes to collect your pension, how much you have will depend on three things: how much you saved, how long you were paying into it for, and how well your investments performed.
How do I access my pension pot?
One of the most important things anyone wants to know is when they will be able to access their money. In general, workplace and personal pensions cannot be accessed until you’re at least 55. This number will rise to 57 in 2028. State pensions are less flexible and cannot currently be accessed until you’re 66. However, this is rising to 67 between 2026 and 2028, and again to 68 years old from 2044.
These dates may sound far off in the future, but they’ll come around sooner than you think, so it’s important to plan ahead. Investing early is one of the best ways to increase your retirement pension pot.
Getting advice on your pension
Taking control of your finances can be daunting, especially when it comes to planning for retirement. If you're looking for individual advice on top of your workplace pension, such as tracking down old pensions or making further investments please do get in contact with us here for a free no-obligation chat with one of our expert advisers.