
10 tips to help you save money on your shopping trips
• 5 years agoAs inflation and import costs have risen, shoppers have been hit with bigger bills when… Read more »
m We will only use this infomation for the mailing list you have signed up for and will never pass your infomation to any other companies.
Call now for free (including mobile)
In a recent FCA study, they found that 72% f pension pots accessed since the 2015 freedoms came into effect were held by those under 65 with most opting for lump sums rather than drawing a regular income. 53% of pension pots accessed had been fully withdrawn and transferred into another savings or investment account but concerns have been raised about the tax bills incurred.
When a large amount of money is withdrawn from a pension account, there will be a significantly high rate of tax to pay. According to current figures, the Treasury has raised five times more in tax from pensions than it forecast when the freedoms were brought in.
The report spoke about the large numbers of people withdrawing their pension and how this may affect them; “Several factors motivated consumers to access their savings early, including a perception that ‘everyone is doing it’ and a general climate of mistrust.” However, moving cash “can result in consumer paying too much tax, missing out on investment growth or losing out on other benefits.”
Meanwhile, millions of British workers who work for large companies are missing out on around £650 a year from their employer. Pension offers from some of the UK’s biggest employers have been dubbed ‘buy one get one free’ schemes where employers agree to match additional contributions made above the minimum level required.
So, if a company’s minimum pension contribution was 3% of your salary and they matched it exactly, that is what staff would pay. However, some larger companies allow you to up your contribution, to say 6% of your salary, and they will still match it exactly meaning that you could potentially double the amount of money entering your pension each month.
For every £1 an individual adds to their pension, they receive tax relief on it from the government so the cost to the individual is only 80p from their salary. When an employer matches the contribution exactly, the 80p invested becomes £2 in the pension pot. So these schemes sound beneficial and a no brainer but the uptake is quite low as most people don’t know about them.
Steve Webb, director of policy at Royal London, commented on these findings to say; “Where workers are unaware of this option, or choose not to take it up, they are in effect passing up on ‘buy-one, get-one free’ cash… When individuals are thinking about where to put their money to get the best return, the chance to more than double your money through an employer contribution and tax relief from the government takes a lot of beating.”
With worrying reports that many are missing out on cash for their pension from their employer and those accessing their pension early are moving money without advice, what can and should you do when it comes to your pension:
As we are not pension experts, we always recommend that you take advice from an independent pension adviser. For more information regarding pensions, visit the Pensions Advisory Service.