Basic 1
Typically for this person:
- Closer to retiring
- Wants to avoid loss as much as possible
- Investing over the short term (0-2y)
Equities
Other
Other
Here’s the 3 things you really need to
know about pensions
First, tell us a couple things about you so we can crunch the numbers
You:I am
34
years old, and this year I will earn roughly
£50,000
Could you live on £8,767 a year 😐? That’s currently the maximum amount the government gives you in the state pension after reaching retirement age, which for you would be 68. The amount could be less if you haven’t been paying in national insurance all your life.
Most people think that’s not enough so need another source of income after they stop work. The most common and tax efficient way to do this is usually though a pension.
After you turn 55, you can convert whatever you have put aside in a pension during your working years into an annual income for the rest of your life. It could make all the difference in how you spend over a third of your lifetime!
The government thinks pensions are great too, so most of the time when you pay in, they top it up with more free money based on how much tax you pay. We’ve worked out how much you could get based on what you earn.
See how much free money you could get for each payment in 🎉
You pay in£309
+
The Government adds£77
=
In total you get£386
You won’t get these government top-ups if you pay in more than everything you earned in a year, or more than £40,000. Tax benefits like this do depend on your individual circumstances and might change in the future. If you are a higher rate tax payer your basic rate tax is added by the pension provider, but you have to claim the higher rate tax back on your tax return and then add this to your pension.
Imagine you invite a friend to a party, and they invite two friends, and they invite two friends, and so on, and so on. Pretty soon 300 people are trashing your front room 😰.
This is called “compounding”, and Einstein called it the most powerful force in the universe! This is what should happen to your money over a long time if you leave it in a pension. It’s such a big deal that we’ve given it a new name, Einstein Money.
The main thing about Einstein Money is the younger you start saving, the more you’re likely to get. See how much you might end up with in your pension pot from putting aside that £309, depending on how old you were when you paid in.
YouGovernment
Money
Paid In £386
Paid In £386
Einstein
Money £1,643
Money £1,643
Calculation based on your age, the current state retirement age and a growth rate of 5%. Einstein Money is not guaranteed, but is a reasonable estimate of the effect of compound investment returns on the amount you put aside in a pension over a long period of time, using a widely used growth assumption.
With pensions, as with all investments, your capital is at risk and the value of your pension with Penfold may go up as well as down. You may get back less than you put in.
