Here’s why:
- It helps you save for retirement.
- Your employer also pays into it.
- You receive tax back from the government.
- You don’t have to do anything to be part of it.
Start preparing for retirement early
You might think your retirement is a long way off, but the earlier you start saving for it, the more chance you have of being financially secure when you stop working. Starting to see if this is possible gives your investments more opportunity to grow and provide the lifestyle you want in retirement.
Of course, it is easy to put this off, particularly when your retirement seems so far in the future. Also, it can be challenging to understand this type of retirement lifestyle you want and how much that will cost. As always, taking financial advice from a regulated advisor such as Portafina is highly recommended.
The lack of motivation makes it even more crucial that you remain in your workplace pension scheme. All of the administration is taken care of for you, and your contributions are removed at source. Therefore, you have no significant financial planning to take care of.
Your employer’s contributions
As well as the standard percentage you contribute to your pension, your employer also pays into it. Generally, you will pay around 4% of your gross salary straight to your pension fund. Your employer will top this up with at least another 3%.
The amount you sign up for initially is not fixed, and you can order this as your disposable income fluctuates. What this means is that you have control over your pension contributions.
Boosting your workplace pension
Having agreed on how much he will contribute monthly doesn’t stop you from giving your pension a boost now and again. Putting more money in, even small additional amounts, can significantly boost your pension pot over time.
Should you opt-out of your workplace pension scheme?
In short, no. Opting out of your workplace pension scheme is never a good idea. Of course, life can produce some problematic situations whereby someone might not be able to afford their pension contributions. However, you should also always think long and hard before deciding to opt-out of your workplace pension scheme.
Consider your future
As we mentioned above, one of the benefits of a workplace pension scheme is that the administration is done for you. However, this means it is easy to lose track of your pension.
If you change employers, your contributions to your old workplace pension will cease, and you will join a new scheme. Consequently, you might lose track of the old pension, mainly if you’ve not been contributing to it for too long.
With old workplace pension schemes, you have a couple of options. Firstly, you could leave your money invested as it is. Alternatively, you could transfer it to another pension scheme.
If you choose the second of these options, you should be aware of one thing; not all pension schemes are the same. Some pensions will deliver excellent performance and come with low charges. However, just as many pension plans perform not so well but still charge higher rates. Therefore, if you decide to transfer your funds to another scheme, you should research various pension plans beforehand.
Of course, making such a decision can be challenging. Therefore, you might decide speaking to a regulated financial advisor is worthwhile. They can advise you whether it is best to leave your funds where they are or move them to a better performing or lower charging scheme.
Government regulatory changes
Recent changes in regulations have affected how people can access pension funds. One such change was Pension Freedoms which came about in 2015. The result of this change was that many people can access their pension funds from age 55.
Although this benefit may initially seem appealing, you should consider whether it suits your situation. Taking too much money from your pension pot too early can leave you short of income later.
Conclusion
Workplace pensions offer you considerable benefits, and they are an excellent means of saving for your retirement years. You should understand these benefits, keep track of your pensions, and remain opted in.
