What pension plan do you have in place?
Stay in control of your retirement
Here’s the critical question – can you afford to live on a Government State Pension?
Drawing down approximately £175* per week is not a great sum for many people, especially if you still have a mortgage or rent to pay. Add to the equation monthly utility bills, insurances, council tax and the Sky or Netflix subscription and there’s little left for playtime!
Plus you will need to wait until you reach around 68 years of age before you can access the State Pension and must have paid National Insurance contributions for a minimum of 35 years.
* Full State pension for the 2021/2022 tax year is £179.60 per week.
Do you have a pension plan?
Pension plans offer tax relief on your contributions, which is a major benefit.
Once you are enrolled in a workplace pension scheme your employer will organise for around 5% of your qualifying earnings to be paid into the pension every month. Only after the contribution has been deducted will you pay tax on your earnings so you gain more bang for your buck.
To benefit even further, your employer will contribute an additional 3% (approx.) of your qualifying earnings to your pension scheme. It’s a win-win.
With Rebecca’s evaluation and guidance we are treading a path to a pension model that will certainly suit the lifestyle that I had planned.
What is a workplace pension?
Did you know that as a business owner you can use your pension to reduce your company and personal tax bill? Balancing the right level of payments can benefit both the business and your personal back pocket.
Talking to a professional financial advisor will help you to understand the best tax planning strategies to ensure you keep more of your money.
What are the benefits of a pension plan?
You gain tax relief on your income when investing into a pension plan. As a basic rate taxpayer at 20% you will benefit £20 for every £80 paid into your pension pot. This extra money will be more than welcome when you reach retirement.
The earlier you start to pay into a pension the more compound interest you will receive. In simple terms, this equates to your money growing year on year. Interest is paid on your initial investment after the first year and for every subsequent year, interest is paid again on any investment. The balance would continue to grow even if you didn’t pay into the account ever again.
Once your pension plan is ready to draw down from you can withdraw a lump sum, buy what’s called an annuity to provide regular payments that stay in line with inflation or a fixed agreement, or keep it invested and take what you need when you need it – potentially allowing it to grow further.
Do you have pension schemes that need consolidating?
Many people do not know the answer to this but it’s surprising how many have multiple pension pots or investments that they either aren’t aware of or have no idea how they are performing financially.
Due to the tax benefits of pension schemes it often makes sense to consolidate all plans into one, even if you have an ISA or alternative investment funds.
Talk to Willow Financial Solutions about pension schemes and start to make your money work for you today.
