Everyone makes mistakes. It’s human nature. But if you make an error with your pension, you could end up paying for it for the rest of your life. To help you make the most of your pension, make sure you don’t fall for these costly mistakes.
We hope you find this helpful, but it’s not personal advice. You can’t normally access money in a pension until at least age 55 (57 from 2028). Pension and tax rules can change, and benefits depend on your circumstances. If you’re not sure what’s right for your situation, please seek advice.
1. Don’t miss the opportunity to cut your tax bill
Whenever you pay into a pension, you’ll get a top up from the government in the form of tax relief – slicing down your tax bill one payment at a time.
Every UK resident under 75 qualifies for basic-rate (20%) tax relief, even children and other non-taxpayers. Anyone who doesn’t have earnings can contribute up to £3,600 (you pay £2,880, the government adds £720 in tax relief).
If you pay higher-rate tax (40%) you can claim up to an additional 20% in tax relief through your tax return or local tax office. Additional-rate taxpayers (45%) can claim back up to an extra 25%. You must pay enough tax at the relevant rate to claim back the full amount. Different income tax rates and bands apply for Scottish taxpayers.
Come January, when most tax bills need paying, you might be grateful for the extra money you can claim back because of the contributions you make now.
2. Don’t fall into the trap of not saving enough
We all have dreams about what our retirement might look like, yet the majority of us don’t know how much to save for the income we might need or want when we finally retire. In fact, only 20% of savers are confident they are saving enough for retirement.
To help simplify saving for retirement, the Pensions and Lifetime Savings Association (PLSA) launched national income and living standards, designed to help people picture what lifestyle they want in the future. There are three living standards. Continue reading the full and original article here from: Hargreaves Lansdown
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