What are some advantages and disadvantages of contributing to a pension scheme?
Asked by Star L - 1 year ago
Answer:
The main advantage of contributing to a pension scheme is the tax relief: for every £100 you pay in the Government adds £25. If you are a higher rate taxpayer you may be able to claim up to a further £25 back in tax relief.
If you are able to join an employer’s pension scheme you should do so. The advantage here could be an employer’s contribution to your pension scheme – free money to a degree.
The main downside of a pension is you cannot access your money until you are at least age 55.
Therefore a pension should be number one on your shopping list if you are saving for retirement, but look elsewhere, for example ISAs, if you want your money earlier.
Disclaimer:
The answers above are for guidance only and should not be acted upon without you receiving independent financial advice relevant to your circumstances. To find an IFA please go to http://www.unbiased.co.uk
Sources:
Danny Cox, Certified Financial Planner, Hargreaves Lansdown
Chartered Financial Planner, Certified Financial Planner and heads the advisory team at Hargreaves Lansdown. Danny is the Money Marketing Best Retirement Planner 2007 and Financial Adviser SIPP Adviser of the Year 2007.