Workplace pensions come with a few significant benefits that make them a no-brainer to be enrolled into:
- They enable you to save for your retirement.
- Your employer also contributes to your future.
- Tax relief boosts your contributions.
- Everything is taken care of on your behalf.
Get Started Early
You must allow as much time as possible to maximize your pension to grow. Therefore, the earlier you start saving into a pension fund, the better your chance of attaining the retirement lifestyle you wish.
The issue about pensions for many people is that their retirement always seems like a faraway place. This makes it challenging to understand what lifestyle they want when they finally stop working. Consequently, they put off preparing for retirement, often leaving their preparations until it is too late.
That is why it is crucial to remain enrolled in a workplace pension scheme. All the administration is taken care of, and your contributions are taken from your gross salary. You have nothing to think about other than knowing you are making a significant investment in your future self. Planning for your long-term future is crucial; when considering your pension, take expert advice from a specialist such as Portafina.
Set Contributions From You And Your Employer
As just alluded to, your workplace pension contributions are taken from your salary at source. They consist of a set percentage, which is typically around 4%. This amount is matched through employer contributions of 3% and tax relief of 1%. Therefore, about 8% of your salary’s value goes into your pension fund, but your contribution is only half. That’s a great deal in anyone’s book!
Although your contributions are set, you still maintain control of your money. For instance, if you want to increase the amount you save towards retirement, you can do so. Similarly, you can reduce these payments whenever you wish. Control of your money always remains in your hands.
Give Your Funds A Boost
Saving into a pension is an excellent way to prepare for retirement. Indeed, many people choose to add more money whenever it is possible. You can do this regularly, boosting your monthly contributions by an additional one or two percent. Alternatively, you could contribute more for a limited time. Of course, how you contribute to your pension depends upon your circumstances, and you can do so when you can afford it.
Should You Opt Out?
We recommend you never opt out of your workplace pension scheme in an ideal situation. However, we understand that everyone’s financial circumstances differ, and there may be occasions when someone has pressing money issues meaning they cannot continue to contribute to their pension. Even if you believe you are in such a situation, you should think carefully before opting out of a workplace pension scheme, as it is such a valuable asset.
Remain Mindful Of Your Future
We mentioned earlier that one of the benefits of a workplace pension scheme is that everything is taken care of on your behalf. But, unfortunately, this also means that your long-term savings are somewhat out of your hands.
Of course, you remain in control, but a lack of involvement can lead to pensions being forgotten. This situation can come about as people become complacent, thinking everything is taken care of, including their future.
Most people have more than one job during their working lives, so what happens to your workplace pension when you change jobs? Workplace pensions are linked to a specific company or employer. Therefore, you stop paying into one scheme when you leave an employer and start contributing to the pension scheme at your new workplace.
You can carry on contributing to your old scheme in certain circumstances. After that, however, you will cease receiving contributions from your old employer. Therefore, your decision is whether you keep your money in your old pension or switch it to another scheme.
While deciding, you should consider something about pensions that you may not be aware of; some are different. For instance, some have low charges and perform excellently, while others are the opposite.
Your funds may be better off in a new scheme, or your old workplace pension might be the best place to leave your money. A regulated financial advisor can help you make the right decision to ensure your money works for you.
Government Regulatory Changes
Regulatory changes can affect how you access your pension funds, with the latest significant change occurring in 2015. That was when Pension Freedoms were introduced, meaning that many people can now access their pension savings from fifty-five.
However, this benefit does not apply to all pensions. Therefore, you should check your pension benefits to understand how and when you can access your money. A financial advisor can help you with this and routinely assess your pension scheme to ensure it remains tailored to your needs.