Long-term savings
Put simply, saving into a pension is like any other form of long-term saving. You put money away regularly by paying pension contributions.
Your retirement
Getting more
If you’re in a workplace pension, your employer also pays money into your pension savings in the form of contributions. This means you are in effect getting ‘free’ money in your pension savings each payday.
Workplace pensions are valuable because your employer contributes too. This means you are in effect getting ‘free’ money in your pension savings each payday.
You don’t pay any income tax on pension contributions. This is known as ‘tax relief’. It means the income tax you would have paid goes into your pension savings instead.
You can contribute up to 100% of your salary towards your pension savings and still get tax relief, as long as the combined contributions from you and your employer are below the annual allowance.
This applies to all the pension schemes you’re actively saving into, including our Scheme and any personal pensions you have.
This allowance is currently £60,000 a year.
When you reach retirement you can usually take some of your pension savings as tax-free cash.
Your pension is ‘ring-fenced’ for your retirement. You usually can’t take money out of pension savings until you’re at least 55.
The only exceptions are:
- You qualify to take pension savings early because of serious ill-health, or
- your pension scheme’s rules allow you to take pension savings earlier (and this is rare).
It’s currently expected that the minimum age for taking pension savings will increase to 57 in 2028.
The lifetime allowance has been abolished and replaced with two new allowances.
- The lump sum allowance. This limits the total amount of tax-free cash you can take when you retire to £268,275.
- The lump sum and death benefit allowance. This limits the tax-free death benefits that can be paid when someone dies to £1,073,100.