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A Word on Pensions

A bit early for you to start thinking about pensions you may think, but it is never too early to think about your retirement!

This is a specialist area and we would strongly suggest you seek the advise of a registered Independent Financial Advisor before embarking on a particular pension arrangement to ensure you fully understand the pros and cons. Suffice to say, what may be suitable for you now may not be suitable for you in a few years time, as your personal circumstances and the legislation changes.

As a general rule your national insurance contributions will count towards your state pension, when you reach retirement age. However the manner in which the government calculate this means you must pay your contributions for an entire tax year, otherwise it may not count. For further information contact The Pension Service.

You can set up a personal pension scheme if you wish and contribute up to £3,600 pa with tax relief into your personal scheme without reference to your earnings. You can contribute more than £3,600, but tax relief will only be given if you have sufficient earnings.

The tax relief varies and is dependant on your highest tax rates, but broadly most students will probably receive basic rate tax relief (ie 20%). Therefore in order to make a gross contribution of £3,600 into your personal pension scheme, you would only need to make a payment of £2,880 (£3,600 less 20% tax relief). The Inland Revenue effectively pay the difference.

The catch is you cannot get your hands on the cash until you reach retirement age. However, there are smart ways to use the funds in the meantime, such as using it to secure a mortgage. You should view a pension like your piggy bank into which you will contribute money every week/month/year. The key for the piggy bank is only given to you when you reach retirement age.

Once again, there are other factors which you may need to consider and the advice of a registered Independant Financial Advisor should be sought beforehand.

STS A Word on Pensions


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