It’s just that you won’t see that money until you come to take it later on in life, rather than having it right now.
While the State pension may provide a vital part of your overall retirement income, you could well need more to meet your retirement goals. From April 2023 the full state pension provides an income of up to £203.85 a week – £10,600 a year. Anyone who reached state pension age before April 2016 gets £8,122 a year, or £156.20 a week
The amount you’ll get is based on your National Insurance record. You can get a forecast by visiting the Government website. Compare this with what you currently earn and think about whether or not this would be enough for you in retirement.
Saving into a pension is very tax efficient as long as you stay within the limits set by the Government. You get tax relief on the money you pay into the Scheme (which means, in effect, it costs you less).
When you come to take your savings (which could be any time from the age of 55 onwards) you can take 25% as a cash lump sum, which is paid tax free.
You can choose to use your savings pot to buy a guaranteed income (with or without taking a cash lump sum) or you can continue to invest your money and withdraw all or some of it as and when you need it.
As long as you have been a member of the Scheme for more than 30 days, the value of your savings pot can stay in the Scheme or you could transfer the value to another pension. Whichever you choose you won’t lose out.
If you were to buy company shares on the stock market, when your money grows in value you have to check if you need to pay any Capital Gains tax. The money you pay into your TPT savings pot isn’t affected by Capital Gains tax, regardless of how much it grows in value from buying shares in companies in the UK or around the world.
If you die before you retire, your family or your beneficiaries would receive the value of your savings pot as a lump sum. You can complete a nomination (beneficiary) form to choose who you would prefer this money to be paid to.
There’s always a temptation with savings to use them before you intend to. This is fine for short-term savings intended for a holiday, a new car or even the deposit on a house. But when it comes to making sure that you have enough money to live on in retirement, it’s essential that you keep on saving for as long as possible so that your money has time to build up and provide you with an income.
Your investments are key to making your savings grow. Your TPT savings pot can be a good way to invest, with low fund management/investment charges. Investing in stocks and shares yourself can be more expensive, and the funds offered through the Scheme invest in a large number of different shares and/or other types of investments and are managed for you by experienced managers.
If you haven't registered for your Retirement Savings Account yet, click here to find out how you can do it