It is thought that over half the people in the UK right now are either not saving enough money to enough for a comfortable living after they stop working or they are not saving any money at all. It is understandable really, as retirement can feel a long way off in the future to worry about and pensions can seem too complicated to want to deal with.
However, there are many great reasons why it is important to save for your retirement. If you don’t, you have three options – alter your expectations of what you feel you should have when you retire, save more money at a later date or simply retire later than you were hoping. If you are planning on moving abroad when you retire, you are advised to look at the QROPS Help Centre website.
Primarily, you should start saving something for retirement simply because the maximum amount of basic state pension is lower than the majority of people are looking to retire with at their disposal.
Benefits Of Saving Into A Pension Fund
When you make the decision to start saving money for your retirement, you need to make a decision about the way you are going to do it. Pensions, in particular, have a number of crucial benefits that make your nest egg savings grow quicker than if you used an alternative. In the simplest terms, a pension is essentially a savings plan that offers tax relief.
As you regularly make contributions, the money you invest grows as you continue working, giving you a solid income for your retirement years. You are usually able to access money saved into your pension fund from 55 years and onwards.
If you normally have trouble saving, you can set-up automatic payments that mean your pension fund is topped up regularly directly from your earnings.
How Tax Relief Helps Increase Your Pension Fund
As you already know, whenever you earn over a certain amount from your income, the government takes a portion of this for tax. You can see the amount of tax you pay on your payslip. However, when you put money into a personal pension fund, it is eligible for tax relief.
This means that it is not just the money you deposit into the pension fund that you get, but also a percentage of the money that would have gone to the government in the form of taxes too. The great thing is that, even if you are on such a low income that you don’t qualify for paying tax, the government will still put money into your pension fund in the form of this tax relief.
As you can see it is incredibly important to have some sort of retirement savings plan in place and pensions are probably the easiest and most effective way to go about it. If you leave it to chance or keep putting it off, you might find yourself retiring with just a state pension to survive on – which may not even be enough and may force you to work even past retirement age.