The advantages of saving into a pension
When you’ve decided to start saving for retirement, you need to choose how you’re going to do it.
Pensions have many important advantages that will make your savings grow quicker.
A pension is basically a long-term savings plan with tax relief. Getting tax relief on pensions means some of your money that would have gone to the government as tax goes into your pension instead.
If you save through a defined contribution pension scheme, your contributions are invested. This is so they grow throughout your working life and then provide you with an income in retirement.
Generally, you can access the money in your pension pot from the age of 55.
How tax relief can help build up your pension pot
When your income is over a certain level, the government takes tax from your earnings.
You can see this on your payslip. If you put money into a pension scheme, it qualifies for tax relief.
This means that as well as the money you’re putting in, some of your money that would have gone to the government as tax now goes into your pension pot instead.
This is one of the benefits of a pension over a traditional savings account, and is why pensions are so important.