Tax-efficient saving into a pension will lock your money away for retirement – and the sooner you start, the better.

Here, we answer some of your questions about workplace pension schemes, automatic enrolment and how to plan for retirement.

When should I start planning?

It’s never too early to start planning for retirement. The sooner you start, the more time you’ll have to take advantage of tax relief – and the more time your pension has to grow.

You’ll also benefit from compound interest – Albert Einstein called it the “eighth wonder of the world” – by earning returns on your returns. This way, you build a firm foundation for your future financial needs.

How much should I be saving?

Ideally, you should save as much as you can. But you may have debt to deal with, and other financial goals and commitments, such as saving to get onto the property ladder.

As a general rule of thumb you should be paying half your age as a percentage of your salary when paying into a pension. So that means if you’re age 30 you should contribute around 15% of your salary. Bear in mind that this amount includes your employer’s contribution.

If you find yourself with extra money once you’ve cleared your debts, you could use this to boost your pension contributions. You can pay up to £40,000 a year into a pension, or 100% of your salary, whichever is less, to benefit from tax relief, which is based on the rate of Income Tax you pay. Twenty percent of tax relief is automatically added to your contributions, but a higher-rate taxpayer could claim an extra 20% via their annual tax return.

Retirement is a long way off. What’s the problem with delaying?

Your retirement may seem a lifetime away, but if you delay saving into a pension, you’ll need to pay in a bigger chunk of your salary into your savings later in life. The sooner you start, the more time your money has to build into a substantial sum. The value of compounding is not to be underestimated – it can make an enormous difference over the decades.

Should I prioritise saving for retirement or getting on the property ladder?

When you’re young, getting on the property ladder may be your financial priority. But you shouldn’t neglect saving for the long term. Setting aside even a small amount in a pension can make a big difference over the long term.

Also, beware of thinking that you can rely on property for a retirement income. While an investment property may provide some rental income, it won’t enable you to spread your money across a range of investments like a pension does. Property also doesn’t have the same tax advantages.

What’s auto enrolment?

This is a government initiative that means you are automatically enrolled in your workplace pension. That’s provided you are earning £10,000 or more and aged 22 or older. It requires that employers also pay into this, so you effectively benefit from a free pay rise.

It’s generally unwise to opt out, as you’ll miss out on valuable employer contributions. The minimum employer contribution level stands at 3%, and total contributions amount to 8% of salary. So if your employer pays in 3%, you must pay in 5%.

What’s salary sacrifice?

You exchange part of your salary in exchange for other benefits from your employer, such as pension contributions. Any benefits come out of your salary before you pay tax, so this reduces the amount of National Insurance you and your employer pay.

Beware of any pitfalls, however, before signing up. Opting for salary sacrifice could impact on a mortgage application, for example, as you’ll have a lower income, or benefits such as maternity pay.

Why can’t I just rely on the State Pension?

The current State Pension amounts to just over £9,110 a year (based on the 2020/21 tax year). This could form a basic foundation, but it is far from enough for a comfortable retirement. A workplace or personal pension, alongside other savings, supplements your basic State Pension.

Besides, the State Pension age is gradually creeping up as the government tinkers with the rules. It’s risen from 60 to 65 for women, and is expected to increase further in the coming years.

You will need a substantial pot by the time you reach retirement. Remember that your pension income may have to cover other costly financial needs in retirement too, such as long-term care.

How much do I need to have saved up in total?

This depends on the lifestyle you want to lead in retirement, and your outgoings. You will need to cover your bills and any other spending, such as cars and holidays, but you may have paid your mortgage off – so some costs may shrink.

As a general rule you’ll probably want to have a retirement income that amounts to about three-quarters of your pre-retirement salary.

When you’re approaching retirement you can do some serious number crunching by using online calculators to work out if you’ve enough saved, and a financial planner can help. The longer you have to reach the figure you need, the better.

How can I plan for retirement?

The simplest way is to join your workplace pension scheme. You benefit from your employer’s contributions, and government tax relief. However, you won’t be able to decide which pension provider these savings are with.

If you can save more, you could consider a personal pension plan. Plenty of investment managers offer ready-made, simple solutions for you to invest towards retirement. It’s not a complicated process.

What other forms of savings should I consider?

Remember that long-term saving isn’t just about pensions – you may have money tied up in property or other savings and investments, such as ISAs, that will eventually contribute towards your retirement income.

You can combine your lifetime’s savings and investments to form an income to suit your needs in retirement.

 

The value of an investment with St. James's Place will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested.

Tax-efficient saving into a pension will lock your money away for retirement – and the sooner you start, the better.

Here, we answer some of your questions about workplace pension schemes, automatic enrolment and how to plan for retirement.

When should I start planning?

It’s never too early to start planning for retirement. The sooner you start, the more time you’ll have to take advantage of tax relief – and the more time your pension has to grow.

You’ll also benefit from compound interest – Albert Einstein called it the “eighth wonder of the world” – by earning returns on your returns. This way, you build a firm foundation for your future financial needs.

How much should I be saving?

Ideally, you should save as much as you can. But you may have debt to deal with, and other financial goals and commitments, such as saving to get onto the property ladder.

As a general rule of thumb you should be paying half your age as a percentage of your salary when paying into a pension. So that means if you’re age 30 you should contribute around 15% of your salary. Bear in mind that this amount includes your employer’s contribution.

If you find yourself with extra money once you’ve cleared your debts, you could use this to boost your pension contributions. You can pay up to £40,000 a year into a pension, or 100% of your salary, whichever is less, to benefit from tax relief, which is based on the rate of Income Tax you pay. Twenty percent of tax relief is automatically added to your contributions, but a higher-rate taxpayer could claim an extra 20% via their annual tax return.

Retirement is a long way off. What’s the problem with delaying?

Your retirement may seem a lifetime away, but if you delay saving into a pension, you’ll need to pay in a bigger chunk of your salary into your savings later in life. The sooner you start, the more time your money has to build into a substantial sum. The value of compounding is not to be underestimated – it can make an enormous difference over the decades.

Should I prioritise saving for retirement or getting on the property ladder?

When you’re young, getting on the property ladder may be your financial priority. But you shouldn’t neglect saving for the long term. Setting aside even a small amount in a pension can make a big difference over the long term.

Also, beware of thinking that you can rely on property for a retirement income. While an investment property may provide some rental income, it won’t enable you to spread your money across a range of investments like a pension does. Property also doesn’t have the same tax advantages.

What’s auto enrolment?

This is a government initiative that means you are automatically enrolled in your workplace pension. That’s provided you are earning £10,000 or more and aged 22 or older. It requires that employers also pay into this, so you effectively benefit from a free pay rise.

It’s generally unwise to opt out, as you’ll miss out on valuable employer contributions. The minimum employer contribution level stands at 3%, and total contributions amount to 8% of salary. So if your employer pays in 3%, you must pay in 5%.

What’s salary sacrifice?

You exchange part of your salary in exchange for other benefits from your employer, such as pension contributions. Any benefits come out of your salary before you pay tax, so this reduces the amount of National Insurance you and your employer pay.

Beware of any pitfalls, however, before signing up. Opting for salary sacrifice could impact on a mortgage application, for example, as you’ll have a lower income, or benefits such as maternity pay.

Why can’t I just rely on the State Pension?

The current State Pension amounts to just over £9,110 a year (based on the 2020/21 tax year). This could form a basic foundation, but it is far from enough for a comfortable retirement. A workplace or personal pension, alongside other savings, supplements your basic State Pension.

Besides, the State Pension age is gradually creeping up as the government tinkers with the rules. It’s risen from 60 to 65 for women, and is expected to increase further in the coming years.

You will need a substantial pot by the time you reach retirement. Remember that your pension income may have to cover other costly financial needs in retirement too, such as long-term care.

How much do I need to have saved up in total?

This depends on the lifestyle you want to lead in retirement, and your outgoings. You will need to cover your bills and any other spending, such as cars and holidays, but you may have paid your mortgage off – so some costs may shrink.

As a general rule you’ll probably want to have a retirement income that amounts to about three-quarters of your pre-retirement salary.

When you’re approaching retirement you can do some serious number crunching by using online calculators to work out if you’ve enough saved, and a financial planner can help. The longer you have to reach the figure you need, the better.

How can I plan for retirement?

The simplest way is to join your workplace pension scheme. You benefit from your employer’s contributions, and government tax relief. However, you won’t be able to decide which pension provider these savings are with.

If you can save more, you could consider a personal pension plan. Plenty of investment managers offer ready-made, simple solutions for you to invest towards retirement. It’s not a complicated process.

What other forms of savings should I consider?

Remember that long-term saving isn’t just about pensions – you may have money tied up in property or other savings and investments, such as ISAs, that will eventually contribute towards your retirement income.

You can combine your lifetime’s savings and investments to form an income to suit your needs in retirement.

 

The value of an investment with St. James's Place will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested.

Tax-efficient saving into a pension will lock your money away for retirement – and the sooner you start, the better.

Here, we answer some of your questions about workplace pension schemes, automatic enrolment and how to plan for retirement.

When should I start planning?

It’s never too early to start planning for retirement. The sooner you start, the more time you’ll have to take advantage of tax relief – and the more time your pension has to grow.

You’ll also benefit from compound interest – Albert Einstein called it the “eighth wonder of the world” – by earning returns on your returns. This way, you build a firm foundation for your future financial needs.

How much should I be saving?

Ideally, you should save as much as you can. But you may have debt to deal with, and other financial goals and commitments, such as saving to get onto the property ladder.

As a general rule of thumb you should be paying half your age as a percentage of your salary when paying into a pension. So that means if you’re age 30 you should contribute around 15% of your salary. Bear in mind that this amount includes your employer’s contribution.

If you find yourself with extra money once you’ve cleared your debts, you could use this to boost your pension contributions. You can pay up to £40,000 a year into a pension, or 100% of your salary, whichever is less, to benefit from tax relief, which is based on the rate of Income Tax you pay. Twenty percent of tax relief is automatically added to your contributions, but a higher-rate taxpayer could claim an extra 20% via their annual tax return.

Retirement is a long way off. What’s the problem with delaying?

Your retirement may seem a lifetime away, but if you delay saving into a pension, you’ll need to pay in a bigger chunk of your salary into your savings later in life. The sooner you start, the more time your money has to build into a substantial sum. The value of compounding is not to be underestimated – it can make an enormous difference over the decades.

Should I prioritise saving for retirement or getting on the property ladder?

When you’re young, getting on the property ladder may be your financial priority. But you shouldn’t neglect saving for the long term. Setting aside even a small amount in a pension can make a big difference over the long term.

Also, beware of thinking that you can rely on property for a retirement income. While an investment property may provide some rental income, it won’t enable you to spread your money across a range of investments like a pension does. Property also doesn’t have the same tax advantages.

What’s auto enrolment?

This is a government initiative that means you are automatically enrolled in your workplace pension. That’s provided you are earning £10,000 or more and aged 22 or older. It requires that employers also pay into this, so you effectively benefit from a free pay rise.

It’s generally unwise to opt out, as you’ll miss out on valuable employer contributions. The minimum employer contribution level stands at 3%, and total contributions amount to 8% of salary. So if your employer pays in 3%, you must pay in 5%.

What’s salary sacrifice?

You exchange part of your salary in exchange for other benefits from your employer, such as pension contributions. Any benefits come out of your salary before you pay tax, so this reduces the amount of National Insurance you and your employer pay.

Beware of any pitfalls, however, before signing up. Opting for salary sacrifice could impact on a mortgage application, for example, as you’ll have a lower income, or benefits such as maternity pay.

Why can’t I just rely on the State Pension?

The current State Pension amounts to just over £9,110 a year (based on the 2020/21 tax year). This could form a basic foundation, but it is far from enough for a comfortable retirement. A workplace or personal pension, alongside other savings, supplements your basic State Pension.

Besides, the State Pension age is gradually creeping up as the government tinkers with the rules. It’s risen from 60 to 65 for women, and is expected to increase further in the coming years.

You will need a substantial pot by the time you reach retirement. Remember that your pension income may have to cover other costly financial needs in retirement too, such as long-term care.

How much do I need to have saved up in total?

This depends on the lifestyle you want to lead in retirement, and your outgoings. You will need to cover your bills and any other spending, such as cars and holidays, but you may have paid your mortgage off – so some costs may shrink.

As a general rule you’ll probably want to have a retirement income that amounts to about three-quarters of your pre-retirement salary.

When you’re approaching retirement you can do some serious number crunching by using online calculators to work out if you’ve enough saved, and a financial planner can help. The longer you have to reach the figure you need, the better.

How can I plan for retirement?

The simplest way is to join your workplace pension scheme. You benefit from your employer’s contributions, and government tax relief. However, you won’t be able to decide which pension provider these savings are with.

If you can save more, you could consider a personal pension plan. Plenty of investment managers offer ready-made, simple solutions for you to invest towards retirement. It’s not a complicated process.

What other forms of savings should I consider?

Remember that long-term saving isn’t just about pensions – you may have money tied up in property or other savings and investments, such as ISAs, that will eventually contribute towards your retirement income.

You can combine your lifetime’s savings and investments to form an income to suit your needs in retirement.

 

The value of an investment with St. James's Place will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested.

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