Why Planning Your Pension is Crucial
Your pension is one of the most important investments you will ever make. It is the foundation of your financial security in retirement, allowing you to maintain your standard of living when you stop working. The power of compounding means that even small contributions made early in your career can grow into a substantial sum over time.
Understanding the Key Terms
- Employee Contribution: The percentage of your salary that you contribute to your pension. This is often taken before tax, meaning you get tax relief on your contributions.
- Employer Contribution: The amount your employer contributes to your pension. Under auto-enrolment rules, there is a minimum your employer must contribute if you are enrolled in the workplace scheme.
- Tax Relief: When you contribute to a pension, the government effectively refunds the income tax you would have paid on that money. For a basic rate taxpayer, a £100 contribution only costs you £80 from your take-home pay because the £20 tax is added back into your pension pot.
- Investment Growth: Your pension contributions are invested in a range of assets like stocks and bonds. The growth rate is the average annual return you might expect on these investments. This is a crucial factor in how large your pot will grow.
Using Our Calculators
Our calculators are designed to give you an estimate of your financial future. The Pension Growth Calculator helps you visualise how your current savings habits could translate into a future pot. The Pension Goal Calculator works backwards, helping you figure out what you need to save each month to reach a specific retirement target. Use these tools to experiment with different scenarios and take control of your long-term financial planning.