Start Saving for Your Retirement with Pensions
As you start planning for retirement, it’s essential to think about how you will fund it. One of the most effective ways to do so is by starting to save in pensions. Pensions are a tax-efficient way of saving for your future, with many benefits. In this post, we will discuss the advantages of pensions and how WIM Accountants can help you with your pension planning.
Advantages of Pensions
Tax relief – One of the most significant advantages of pensions is tax relief. You will receive tax relief on contributions you make to your pension up to certain limits. This means that the government will add tax relief for every pound you put into your pension.
Compound interest – Your pension contributions will grow over time, and you’ll benefit from compound interest. This means your savings will earn interest on the interest they’ve already accrued, helping your pension pot grow faster.
Regular contributions – Contributing regularly to your pension will help you steadily build up your retirement savings. You can contribute monthly or annually, depending on what works best for you.
Flexibility – Pensions offer much flexibility regarding how to access your savings when you retire. You can take your pension as a lump sum or receive regular income payments. You can also choose to take an annuity which will provide a guaranteed income for the rest of your life. You can also withdraw money from your pension in stages and mix different options. Lastly, you can pass your pension on to your loved ones after your passing.
The other way you can receive a pension is once you reach your state pension age which is currently 66 and will gradually increase to 67 by 2028.
You need at least 10 qualifying years to receive a state pension, but you must have 35 qualifying years to receive a full pension. Individuals starting to contribute towards the state pension from 6 April 2016 by earning more than the lower-earning limit would need to contribute for a minimum of 35 years to qualify for the full state pension.
Your entitlement will be reduced proportionally if you have less than 35 qualifying years. Each qualifying year towards your State Pension entitlement is worth £5.29 per week to your new pension. The exact amount you get is calculated by dividing £185.15 by 35 and multiplying by the number of qualifying years after 5 April 2016.
The current full amount of State Pension entitlement for those who reach their State Pension age on or after 6 April 2016 is £185.15 per week. This is approximately £9,628 per year.
If you have any gaps in your National Insurance record, you can make voluntary contributions to fill them. The cost of voluntary contributions can vary depending on the number of years you are trying to fill and your income level.
The government has extended the deadline for individuals to make voluntary contributions until 31 July 2023.
Income from other sources, such as a private pension, may affect your entitlement to the State Pension. The amount of income you can receive before it affects your entitlement will depend on your circumstances.
These figures are subject to change and may vary depending on your circumstances.
How WIM Accountants Can Help
At WIM Accountants, we can help you with your pension planning in several ways:
Reviewing your current pension arrangements – We can review your existing pension arrangements to ensure that you’re getting the highest value for money and that they’re still suitable for your needs.
Recommending pension schemes – We can recommend pension schemes that are best suited to your circumstances, considering your age, retirement goals, and risk tolerance.
We can provide tax advice on pension contributions, including how much you can contribute, the tax relief you’re entitled to, and the tax implications of taking your pension benefits.
We can help you administrate your pension scheme, including setting up automatic contributions.
We can check your national insurance records and help you update them with HMRC if you have significant gaps and are reaching your state pension age.