A chat with a financial adviser is a must if you want to have a comfortable retirement. If you do not get help, you may not be motivated to save. At the start of your career, retirement can seem a long way off, but it is vital to get saving as soon as you can. With 40 years or more saving the pension has time to grow. Your money gains compound interest, the snowball effect of gaining interest on last year’s interest which will turn your pounds into so much more by the time you think about retirement.
Many do not understand about tax relief on a pension. As a basic rate taxpayer (earning less than £37,700) you get 20% tax relief on any money you save in a pension. So, for every £80 saved, the government tops it up to £100. If you become a higher rate taxpayer the tax relief on your pension saving goes up to 40%. It would appear that many people do not understand about tax relief on pensions and over 25% have never heard of tax relief. Some have an understanding but only a very few have a full understanding.
Again, there is a gender issue here as around 30% of women have no knowledge of tax relief. Another disadvantage faced by women in saving, getting credit and achieving a good income. Most people (60 per cent) also said they didn’t know they could contribute to the pensions of their spouse or their child (in a Children’s Stakeholder Pension).
It would seem that once people understand the basics of pension saving and tax relief, they are much more likely to act more positively with increasing their pension contributions.