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Early working life? It pays to get into pension saving now!

The new pension rules mean that there’s much more flexibility and choice over how we take our cash in retirement than ever before. Whether you’re in your early 20s or bidding farewell to your 30s, it’s time to get to grips with pensions so you can take advantage of the new rules. The sooner you start paying into your pension, the more time and opportunity your money will have to grow. And the great news is that with the pension changes, you’re likely to be starting a good savings habit years earlier than previous generations.

If you’re aged 22 or older and are employed with a salary of at least £10,000 a year, you might find that you’ve automatically been made a member of your pension plan at work, and your monthly saving habit has been started for you under the new auto-enrolment rules. If you fall into this bracket, you’ll be paying 4% of your salary into a pension by 2018 and your employer will be paying in 3% too. The tax man then tops this up with tax relief.

Traditionally, many people didn’t start paying into a pension until they were in their late 30s, or early 40s, but by starting now you have almost double the amount of time to build up your pension savings so can make it count.

You have choices with your pension too. You can decide where your pension savings are invested, which suits confident and experienced investors. Don’t worry if that feels too daunting to start with – automatic investment options are also available. Remember though, you’re still young and have time on your side, so now’s the time when many people can typically afford to take more risk with their investments, as you have a long time ahead until you’ll be accessing them.

If you’re self-employed, the automatic pension saving rules won’t apply to you, but it’s easy to start your own pension, with a simple personal pension option. You’ll be in control of when you start, or stop, and you can change how much you pay in. You’ll benefit from a tax relief top-up from the tax man too. That means for every £80 you pay into your pension, this becomes £100, for a basic rate taxpayer.

Don’t forget you can still pay into your pension while you’re not employed (up to £2,880 which becomes up to £3,600 with the tax relief top-up). Or, if you’re expecting your partner’s pension contributions to provide for both of you in future years, focus on building up their pot.

No matter how young you are, it’s never too early to think about your pension – it’s the key to funding the fun you want to have in your distant future, which may well be the best time of your life!

Sources:  (Article: 29/04/2015)

Information is based on our current understanding of taxation legislation and regulations. Any levels and bases of, and reliefs from, taxation are subject to change.

A pension is a long-term investment. The fund value may fluctuate and can go down. Your eventual income may depend upon the size of the fund at retirement, future interest rates and tax legislation.