Sponsored post: Would you turn away free money with no catch?
This is what people are doing every day by ignoring pensions as an option to boost their retirement savings. Admittedly, pensions have had a tough time recently; the Government have messed around with them so much very few people understand the rules, the 2007/8 stock market crash still looms large in people’s memories and current annuity rates are at historic lows. But this ignores the free money I was referring to. Free money that is paid by the Government as well! This free money is in the form of tax relief which is applied at 20% to all contributions. Higher and additional rate tax payers can then re-claim the 40% and 50% income tax paid via their tax return. The benefit of this tax relief is increased through compound interest; growth on growth received each year. For example, basic rate tax relief on a £50,000 contribution would be £10,000. This £10,000 alone would grow by £6,289 in ten years assuming a growth rate of 5% a year. So, £16,289 you would not have by ignoring pensions.
This blog was written by Andrew Neligan, a Chartered Financial Planner who helps legal professionals achieve their lifestyle goals.