Under 40 – Pension Plans
If you are under 40, the value of your retirement fund may not be high on your list of priorities. However, it should be! Time to start looking at Pension Plans.
For most people under 40, retirement funds are usually not high on their list of priorities. However, there are many reasons it should be. Due to recent medical advances and lifestyle changes, life expectancy is growing rapidly. This is great news of course, but it also means that you need a larger fund to sustain yourself financially throughout your retirement.
When should you start investing in a pension fund?
Most people recommend investing in a pension as soon as you find a job. The more money you invest earlier, the more than money has time to grow.
How much do I need to invest?
As stated earlier, as much as you can. The government offers generous tax relief on your pension contribution thankfully. Again, the rule of thumb is to invest a portion of your earnings equal to half your age but more if possible.
You can get tax relief on these contributions as follows:
|Age||Income Tax Relief (%)|
As pensions are designed specifically for retirement, they offer numerous advantages that other savings plans don’t.
- Your fund grows in a tax-efficient manner as no capital gains tax are applied to growth.
- The money you pay benefits from the levels of tax relief outline above.
- Your pension cannot be accessed until you’re at least 60 (unless you have a company pension, which may differ), meaning that no matter how tempted you get, you can’t dip into your fund. This is ideal as everybody occasionally has a moment of weakness.