9 tips for maximising your pension savings in difficult times

The obvious way to increase your pension savings is to simply pay more into your pension, but right now this can be a challenge with most of us financially stretched as living costs soar. If you are able to pay more into your pension, however, it’s usually worth doing so, and particularly when stock markets have fallen. That’s because your money buys more investment units when the stock market falls, and fewer when it rises, which helps smooth out volatility.The tax relief on your contributions is also generous and worth making the most of, as it will give your savings an immediate boost. When you pay into your pension, the government will also pay in, with the amount you receive tied to your income tax rate.

Basic-rate taxpayers get 20% tax relief, while higher-rate taxpayers receive40% pension tax relief. They get 20% automatically and then can claim an additional 20% via their self-assessment tax return. Find out more in our guides How pension tax relief works and How do I reclaim higher rate pension tax relief? If you’re paying into a workplace pension, it’s worth seeing if your employer will match your contributions, so the more you put in, the more they pay in too.

You can continue to receive tax relief on your pension contributions right up until you reach age 75. However, once you’ve started taking money out of your defined contribution pension, which you can usually do from age 55 onwards, your Annual Allowance, which is the amount you can pay into your pension and receive tax relief on, falls from £40,000 a year, or 100% of your annual earnings, to £4,000. This is known as the Money Purchase Annual Allowance (MPAA). Read more in our article How do pension allowances work?

Author: wpadmin

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