Are you starting your first job, mid-way through your working life, approaching retirement or retired? Then this timeline will help you understand the benefits of long-term pension saving and managing your money.
Starting out
Pensions offer a way to grow your money in a tax efficient way, and get tax relief.
This helps to boost your savings and build up a pot of money which you can use to live off later in life.
The sooner you start a pension, the more you’ll save in tax and for the future.
Start a pension
If you’re employed, saving into your employer’s workplace pension is the easiest way to start.
If you’re self-employed, you can set up a pension yourself.
Decide how much to save
Think about how much you can afford to save. Base this on your current budget, and how much you might be able to save if your circumstances change – for example, if you get a pay rise.
Think about how much you’re likely to need in retirement to fund the lifestyle you want
You get tax relief on your pensions savings at your usual tax rate. So, if you pay £80 into a pension, you get £20 tax relief from the government if you’re a basic rate taxpayer.
Higher rate taxpayers can claim back the extra – so it pays to save more.
Throughout working life
Remember to keep an eye on your pensions
It’s important not to forget about your pension. It’s best to check regularly whether you’re on track to meet your needs – and make changes if not.
If you’re saving into a defined contribution pension scheme, you (and maybe your employer) will be making contributions, which are then invested.
So it’s important to check your pot regularly to see how it’s performing, and get advice if you’re concerned.
As your salary goes up, it usually makes sense to save more into your pension. This is the case as long as you have enough money to live on and you’ve got any debts under control.
Save more into your pension
You can generally get tax relief on pensions savings of up to 100% of your relevant earnings each year – subject to a maximum of £60,000 each tax year. If your earnings are £200,000 or more you might have a reduced allowance.
So it’s worth topping up when you can afford it. The sooner you top up, the faster your pension pot will grow.
Manage your debt
It is a myth that you can’t have a pension or other savings if you have debt, but it’s important to stay in control.
Manage your money
You’ll have lots of other commitments during your working life.
Find out how to budget and make your money go further while keeping pension saving in the mix.
Get guidance and advice
Major life changes will affect your finances – for example, moving home, getting divorced or losing your job. If you’re worried, make the most of the free information and guidance that’s out there or speak to a financial adviser.
Thinking about retirement – ten years out
Retirement might seem a long way off. But now’s the time to check whether your pension pots look set to provide the income you want, and to understand your options for accessing them.
It’s also a good time to review your debts, make a will if you don’t have one – and to get advice if you need it.
Review your pensions
It’s important to check whether your pensions are on track to give you the income you want. If there’s a shortfall, you might need to look at ways of boosting your savings.
Understand your retirement income options
To help you plan ahead – read up on your options for taking your pension in advance and how they might affect your tax and any State benefits.
Review your debts
Now is also a good time to take stock of your debts, such as your mortgage, to make sure they’ll be paid off by the time you plan to retire.
Make a will
If you haven’t made a will yet, it’s a good idea to do it now.
This will help make sure your money, other assets and any unused pension pots are passed on according to your wishes.
For your pension savings, you should complete a ‘Nomination of Beneficiary’ form – often called an Expression of Wish form. You need to register it with your pension provider(s), rather than relying on what’s included in your will.
When you die, if your pension is paid out at the discretion of the Trustees, this won’t normally form part of your estate for Inheritance Tax purposes.
Getting free guidance
You can get free, impartial guidance from the government’s Pension Wise service. They’ll tell you about the options for using your pension pot, and the effect on tax and benefits.
Getting financial advice
A financial adviser will recommend ways to adjust your current pension savings to maximise growth. This will be based on your personal circumstances and preferences.
Need more information on pensions?
Call us free on 0800 011 3797 or use our webchat. One of our pension specialists will be happy to answer your questions.
Our help is impartial and free to use, whether that’s online or over the phone.
Opening times: Monday to Friday, 9am to 5pm. Closed on bank holidays.