It’s up to you to decide whether to pay into a pension, and you need to consider your own personal and financial circumstances when you’re making pension decisions.
However, for many people, having a workplace pension and/or a personal pension is a smart idea. It can be a good way to build up your savings for retirement, and pensions come with some unique benefits.
These are some of the reasons you may decide it’s a good idea to pay into a pension:
- The state pension alone is unlikely to be enough to live on during retirement, and it may be reduced further in future.
- Unlike some other savings products, pension funds are usually diversified, which means your money is spread across a range of assets. This can help to manage risk.
- If you pay into a workplace pension, your employer will usually contribute money too.
- Pensions benefit from tax relief, so when you contribute to your pension the government also contributes, adding £2 for every £8 if you’re a basic rate taxpayer, and even more for higher rate taxpayers.
- Pensions are treated generously under inheritance tax rules, so if you die before 75 you can usually pass on your pension tax-free.
- When you reach retirement, you have several options for how to use your pension money, including taking up to 25% as a tax-free lump sum.
Paying into a pension
Even if you can currently only afford to pay a small amount of money into your pension, it’s a good idea to start as soon as possible. The earlier you start, the longer you’ll have to build up your savings and your pension will have more time to grow.
There’s more information about paying into a pension - including tips for how much to save and more information about the actual process of making contributions - on our pension saving page.
PensionBee combines your old pensions into a new plan that you can manage easily online. You can see your current balance and contribute to your pension in a few clicks. Find out more about PensionBee.
Last edited: 19-12-2016