As we move towards March, the end of the tax year is in sight. That means different things to different people. One of those things could be topping up pensions. Getting your money paid into your pension and getting those tax relief benefits is wonderful. If you don’t use your tax allowance, you will indeed lose it. So let’s have at a look at the importance of topping up pensions before the end of the tax year and what you need to know.
How Much Is The Pension Lifetime Allowance?
Your Personal Pensions
Everyone is entitled to the state pension, as long as they have a certain number of qualifying years. It’s all to do with your National Insurance payments and you will need 10 years in order to get any state pension, 30 years for full. The full state pension is currently just shy of £180 a week. It works out at just under £10k a year. Is that enough for you to live on? For you to be comfortable during your retirement and actually enjoy the things you wish to do with your twilight years?
Don’t forget, some people will be entitled to workplace pensions, where your employer pays in when you make contributions. If it’s not, you might want to consider a personal pension. This is where you can set up your own pension plan from a range of providers and hopefully see your fund grow over the years. You have an allowance every year that you can put into pensions and claim tax relief on. This allowance is in place for the tax year and then is gone if you do not use it. Should you want to be topping up pensions to make the most of your allowance, you need to start thinking about it before the end of the tax year.
How Much Will You Need To Live On During Your Retirement?
This is perhaps the ultimate question. Does anyone even really know? There are pension calculators that can help you figure out an amount and then break down what you need to put away each month, depending on your age and that financial goal. The general rule is that the earlier you start saving, the better. This means you have longer for your money to benefit from compound interest and hopefully grow.
One idea is that you should put away half of your age, as a percentage of your salary. So if you were to start paying into your pension at the age of 24, you’d be right in putting 12% of what you earn into your pension every year. Of course, your retirement years are specific to you and your savings for them should be too. Topping up pensions and making the most of your annual pension allowance will help you reach those goals.
When Can You Draw Pension & Could You Live On The Amount?
Get Your Finances Sorted
It is so important to plan for the future, however don’t forget the here and now. Times are tough for a lot of us and you need to be able to afford the cost of living today. Whilst preparing for your retirement now will help you take advantage of lower monthly payments and extra years of compound interest, you should find a good balance that works for your financial situation. It is so important to look after your money. Making what you have got, work for what you need it to. You’ll see plenty of reminders about topping up pensions before the end of the tax year. Be sure you put away what you can for your future, but don’t forget about the here and now too. Happy saving!
