Saving for your retirement doesn’t cost as much as you might think
Information for employees and scheme membersYou might think you can’t afford to pay into a company pension plan, but do you know what it’ll actually cost you? Here are the true costs for someone paying 3%, 5% or 8% of their £17,000 yearly salary into a pension:
| Contribution rate | What this is every year | What this is every month | What this is after basic rate tax relief every month, ie what comes out of your salary |
|---|---|---|---|
| 3% | £510 | £42.50 | £34.00 |
| 5% | £850 | £70.83 | £56.67 |
| 8% | £1,360 | £113.33 | £90.67 |
Thanks to tax relief, although £42.50 is going into your pension fund, you only have to pay £34.00 because the government contributes the rest.
And if your employer pays contributions on your behalf, they’re on top of your basic salary. So you really could be missing out by not joining your company pension plan.
As you can see, joining a pension scheme really isn’t that expensive when you consider the tax relief. And if your employer makes any contributions, this could more than double the money paid towards your pension every month.
This information is based on our understanding of current taxation law and HM Revenue & Customs practice, which may change. The amount of tax relief you’ll get depends on your financial circumstances.
The value of investments may go down as well as up. If they go down you may not get back what you originally invested. Please remember your own circumstances may be different to the examples we’ve given here.
Next steps
If you would like more information you should talk to a financial adviser.
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