Tax relief is a key part of the UK pension system: use it or lose it
30th November 2022 12:30
by Jemma Jackson from interactive investor
Share on
interactive investor shares pension calculations.
New research published today (by actuarial consultancy Barnett Waddingham) shows that nearly half of consumers (45%) are using savings accounts to make provision for their retirement, with a quarter using a cash ISA.
- Learn more: What is a SIPP | ISA vs SIPP | SIPP Tax Relief Explained
Commenting on the research, Alice Guy, Personal Finance Editor, interactive investor, says: “Workplace and private pensions, boosted by pension tax relief, can help us achieve a comfortable retirement and are a key part of the UK pension system. Pension tax relief is ultimately free money from the government – and it is your right. So, it’s important to use it, not lose it, especially at a time when our money needs to work harder than ever.
“A pension invested for the long term is by far the best way for most people to save for retirement. Even saving just £50 a month into a pension scheme could deliver a pot of £100,000 (and because of pension tax relief, that £50 is really only costing you £40). And that’s excluding employer contributions, just to illustrate how your own money can be put to work. The numbers are based on a 23-year-old saving to age 68, with 5% investment growth. It’s not a guarantee, and is just a scenario. The same amount saved over the same 45 years but with annual growth rate of 3% would give £57,018, illustrating that it isn’t just about how much you save, but the level of risk you take too.
“Auto-enrolment has done a lot to increase the number of people saving for retirement, but there’s still a lot more to be done. Awareness of the benefits of pension saving and investing is still not high enough.”
“A lot of people are either scared of losing money on the stock market and/or don’t know how they go about starting to invest. There’s still this perception among many that it’s about posh stockbrokers with red braces – and that investing is ‘not for me’. This couldn’t be further from the truth; you can save from £25 a month and there are lots of tools to help people get started.”
These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.
Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.