Importance of Starting your Pension Young with Bespoke Support Network
September 14, 2017
September 14, 2017
For young people, it’s common to look at your pension as not a priority. Considering that retirement is a long way off for them, planning for their retirement can seem unimportant compared to the other financial priorities in their lives, such as saving for their deposit or paying off their student loan. Pair this with a busy social life and spending money on holidays/travelling, starting to save for your pension is definitely not at the front of young people’s mind – but it should be!
After speaking to older generations, the one piece of advice they give to the younger generations of today is; ‘to start saving now and feel the benefits later on.’
The team at Bespoke Support Network also agree with this. It’s important that young people recognise the importance of pension contributions early on in their careers in order to live a comfortable retirement. In fact, they are actually benefits to saving into your pensions early such as:
● Tax Relief – Pension contributions are eligible for relief from income tax. If you agree to a salary sacrifice arrangement with your employer (where you agree to a lower salary and your employer will pay the difference into your pension), you will also receive relief on the national insurance. While you may be giving up your wages to gain the tax relief, in the long term you will retain more of your salary for your personal benefit – as opposed to losing it to the government in tax you would otherwise pay.
● Employer Contributions – Employers are now obligated to contribute to company pension schemes, and so should contribute to your pension on your behalf. Their payments will be claimed as an allowable business expense, meaning they can be paid in gross. While the charges associated with company pensions are usually lower than an individual pension, you will receive additional funds you wouldn’t receive otherwise.
● Starting Early – Defined contribution schemes are now the main options for pension savings. While they are less generous than the older final salary pension scheme, the later you start saving, the harder it will be to save for a comfortable retirement – so start saving early if you want to be going on luxury cruises every month!
● Future of the state pension – As the ageing population in the UK continues to grow, there is an ever-increasing strain on the state pension fund. Experts are forecasting that the fund will run out before young people have the chance to claim their pension. Following this uncertainty, young people cannot rely on the state to provide for them during their retirement, highlighting the importance of saving into a private pension.
● Early Retirement – The earlier you start saving, the larger your savings will be and the more flexibility you will have when deciding whether or not to retire. As the state pension age increases; with current 18 years olds having to work until they are 70, you may not be eligible for state benefits when you want to retire. The bigger your pension fund, the younger you can stop working and enjoy your longer retirement.
If you’re looking to get pension advice, call our team on 0300 303 3441.