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When you’re under 50, retirement may still seem a long way off and there may be other things competing for any extra money you earn – holidays, children heading off to university or supporting elderly relatives – but putting money away for your future is just as important.
The most popular pension route is to invest in a pension. You can either set up a private pension yourself, or pay into a workplace pension scheme set up by an employer. If you pay into a workplace pension scheme, the amount you choose to contribute is often met by the same contribution (up to a set limit) by your employer – so your savings grow even more quickly. As a part of Lloyds Banking Group, Scottish Widows offers pensions and advice. See how they can further help you understand your options.
Things may have changed by the time you’re ready to retire, but currently there are a number of options available to you when you decide that the time is right to take money out of your pension:
There’s no longer a statutory retirement age for most jobs, and many pension schemes give you some flexibility over when you can take your money once you reach 55.
Pensions are a tax efficient way of saving for your retirement. You don’t pay income tax on the money you pay into your pension or on the amount it grows. You can also take a quarter of your pension pot as a tax-free lump sum when the time comes to retire.
Pension money is invested and your investments can go down as well as up, meaning you could get back less than you invested. The idea is that this pattern of ups and downs balances out over time, which is why investing for your retirement is a long-term plan.
Our pension options calculator can help you understand how these options would work for you if you were to be retiring now and, although the rules or options may change, they can give you an idea of whether you’re on track with your plans or whether it’s worth topping up your payments. Your pension provider or administrator should be able to give you an up-to-date statement of what your pension could be worth at the retirement age you originally selected. You can also find out what State Pension you may be entitled to.
It’s never too late to start saving for retirement, so even if life has got in the way, any money you pay into your pension fund will make a difference.
On average, a person will have 11 different jobs over the course of their working life . If you’re part of a pension scheme at each job, that means you could end up with pension pots all over the place. If you’re self-employed, you may have different pension pots depending on if you’ve worked for a company or pay into accounts privately.
You can choose to combine your pension pots or keep them separate, but it’s worth considering the pros and cons of each option carefully. Keeping tabs on your different pensions is also important, with estimates that there is almost £20bn in ‘lost’ pensions outstanding*.
* The Times - £20bn pension treasure hunt - October 2018
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