Some things to think about

They’re tax efficient
You usually get tax relief on every payment you make but there are limits to how much you can put into a pension each tax year.

Funds to suit you
Payments into a pension are invested in a choice of funds to suit your circumstances and risk attitude.

Your money, your choice
A pension is a means to support you later on in life and you have choices of how you want to take money from it.

What is a pension

A pension is simply a way of putting money aside for when you retire. The money you put in is invested and builds up in a pot, so later on in life you can then access this. At the time you are able to take money from your pension pot, the first 25% will usually be tax-free with the remainder being taxed as income.

Just like any other investments, the value of your pot could go down as well as up so you might not get back what you put in. You would need to keep track of how your pension is performing and make changes to suit you.

Tax and reliefs will depend on your individual circumstances and tax rules can also change.

Why do I need a pension

A question to ask yourself is: when I stop working, how can I continue to support myself in retirement?

You’ll need to think about how much money you would like to live on and how long it needs to last, especially as the age that you start getting the State Pension is increasing.

It’s likely you’ll have heard the phrase; the sooner you start putting money aside for your retirement the better, but even if you feel you’ve left it too late, you could still make a difference by kicking things off now.

There are other ways to save for your retirement. A pension is one of them but you may be using your home as your long term investment, or you could have other investments that you hope will perform to match your expectations in later life.

Pensions are a long-term investment as the sooner you start putting money aside for your retirement the better, even if you’re saving a small amount. They’re also a tax-efficient way of putting money aside.

What’s more, currently, once you reach 55, you can choose what you want to do with your pension pot and you don’t need to stop work to access it. There are situations where you could access your pension before age 55. You can read more on the gov.uk website.

You may wish to seek financial advice to make sure that the pension you choose will help provide you with the retirement you want.

Tax benefits

Saving in a pension is a tax-efficient way of putting money aside for retirement.

So how does it work? When you make a payment into your pension you usually receive tax relief from HM Revenue & Customs (HMRC). And the sooner you start contributing to a pension, the more potential your money will have to grow.

Just like any other investments, the value of your pension pot could go down as well as up, so you might not get back what you put in. You will need to keep track of how your pension is performing and make changes to suit you.

Tax and reliefs will depend on your individual circumstances and tax rules can also change.