What is a Pension?
A pension is not only for old people. It is a tax-free amount of money that you and your employer pay into as a way of saving for your retirement. Sometimes the government pays in to a pension too, and there are also state pensions available. When you want to retire, or from aged 55 onwards, you can draw the cash from the account. Usually an employer or accountant in London will help to set up the pension and payments.
Is a Pension Even Worth It?
The top advantage of pensions is the tax relief, such as gains from investments that are tax-free and tax money back on contributions you place in a pension. When employers place a contribution to the pension, it comes from pre-taxed salary so it will never be taxed. It is important to check your tax bracket when paying into a pension. Better than a savings account, pensions are set up so that they save the most money over the years.
How Much Do I Put in a Pension?
A pension is best started earlier on in life so a larger amount can be saved. Once you have a secure job, either you or your employer should set up a pension. Choose a percentage that you and your employer will pay in to the pension on a monthly basis. When your salary increases, so should your payments. Due to auto-enrolment rules, employers must contribute to employee’s pensions by law unless an employee opts out of this.