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The benefits of having a pension

More financial freedom for you

Pensions are packed with features that are designed to boost how much money you have in your pot. And, ultimately, more money means you get to do more of the things you want to do, especially when it’s time to wave goodbye to the 9 to 5.

The benefits of having a pension

Tax relief: it’s pension cash back

Every time you add money to your pension the government refunds the amount of income tax you have paid. This is effectively a cash-back incentive and can make a significant difference to the size of your savings pot. As with most tax benefits, there is a limit; it’s pretty generous, though.

Tax breaks in your pension

As well as tax relief, there are other tax breaks that mean you get more out of your money with a pension compared with most other savings tools. For example, the money you add to your pension is not taxed. And once your contributions are invested, they grow largely free of taxes, too.

Compound interest: the snowball effect

Albert Einstein called compound interest the “eighth wonder of the world.” Who are we to argue? And your pension amplifies the effects of compound interest because of the tax relief, tax breaks and other contributions you might be receiving. Plus, the sooner you start saving into your pension, the bigger the snowball effect. Ultimately, that means more money for you! Discover more.

Employer contributions

Auto-enrolment legislation means that, as long as you are eligible, your employer must offer you a workplace pension and contribute to it a minimum amount. From April 6th, 2019 this minimum amount is 3% of your gross salary, with you contributing a further 5% (which you’ll get tax relief on). This is effectively a guaranteed monthly bonus from your employer, which is why workplace pensions can be so valuable.

Why are pensions so powerful?

It’s very likely that a significant portion of your pension is invested in stock markets. And it’s these types of investments that deliver the power your pension needs to beat inflation and grow in line with your attitude to investment risk. Find out more about: how pensions are invested; where the potential power lies; balancing risk and reward, and the main philosophies behind investing.

The importance of a balanced savings plan

Bills, family, friends…life is packed with financial commitments. And that’s before factoring in the rising cost of living, unexpected events and saving for the future. A balanced savings plan, based on the principle of little and often, puts you in control of your finances and, crucially, means more peace of mind for you when it matters most.