Starting to contribute to your pension early on in your working life can have a significant impact on your financial security in retirement.
Here are a few reasons why you should consider making contributions to your pension as soon as possible:
In the United Kingdom, there are a number of tax incentives for pension contributions that can help to make saving for retirement more attractive.
One of the main tax incentives is the ability to claim back some of the money you put into your pension through tax relief. The government will add basic rate tax relief of 20% to your pension contributions, this means that if you pay tax at the basic rate of 20%, you will get an extra 20p in tax relief for every £1 you contribute to your pension.
For higher rate taxpayers, they can claim additional tax relief on their contributions via their self-assessment tax return.
Another tax incentive is that pension contributions are exempt from National Insurance Contributions (NICs) and employees will not have to pay NICs on their pension contributions.
Also, any investment returns on pension savings are tax-free and pension savings are not subject to capital gains tax.
It’s worth noting that there are limits on how much you can contribute to a pension each year and still benefit from tax relief, these limits are called Annual Allowance and Lifetime Allowance. It’s also important to consult with a financial advisor or tax professional to understand the implications of these limits.
Overall, the UK government offers a number of tax incentives for pension contributions that can help to make saving for retirement more attractive and financially beneficial for the savers.
Overall, starting to contribute to your pension as early as possible can have a big impact on your financial security in retirement. By taking advantage of the power of compound interest, long-term savings, tax incentives, employer contributions, and flexibility, you can ensure that you have enough money to live comfortably in your golden years.
Here are few sites for further information:
It’s important to note that it’s always good practice to fact-check the information from these websites and to make sure that the information is accurate and up-to-date.