Surprising to some, you're never too old to pay into a pension. (Although after age 75, you will no longer receive tax relief on your contributions)
Paying into a pension, even in later life, can really invite welcomed benefits.
There are inheritance tax planning opportunities to take advantage of, as well as improving your financial security and helping you to look forward to a fulfilling retirement...
Why is it worthwhile paying into a pension later in life?
One of the main reasons is the tax relief offered on pension contributions. In the UK, when you pay into a pension, the government adds tax relief to your contributions, effectively boosting the amount you're saving.
For example, if you’re a basic rate taxpayer, every £80 you contribute is topped up to £100 by the government. For higher-rate taxpayers, the benefits are even more significant.
This is money that you wouldn't otherwise have in a regular savings account or investment, making pensions a particularly attractive way to save, even if you don't start this until you're approaching retirement age.
How can you make the most of your pension contributions later in life?
With the help of an adviser, review your current financial situation and look at how much you can afford to contribute to a pension.
For example, if you are mortgage free, you might have some disposable income available that you can redirect into a pension. Increasing your contributions, even by a small amount, can make a noticeable difference over a few years.
Remember, accessing your pension is relatively flexible
In the UK, you can usually start withdrawing from your pension at age 55, which will rise to 57 in 2028. This means that even if you start contributing at an older age, you don’t have to wait too long to start benefiting from it. Plus, with the possibility of taking 25% of your pension pot as a tax-free lump sum, there’s an immediate benefit that can help you cover any significant expenses in retirement.
If you are still working and paying into a workplace pension, please check if your employer offers matching contributions. Many employers will match your contributions up to a certain percentage of your salary. This is essentially free money that boosts your pension pot, so it's definitely worth maximising this benefit if you haven't already.
If you're already retired but still earning some income, you can continue to contribute to a pension. Although your earnings might be lower, any contribution you make still benefits from tax relief, which can help extend the longevity of your retirement savings.
You haven't left it too late
Don’t fall into the trap of thinking that it’s too late to start or continue contributing to your pension. Whether you're 50, 60, or even older, there are still plenty of advantages to be gained. With careful planning and by taking advantage of tax relief, employer contributions, and the flexibility in accessing your pension, you can enhance your financial wellbeing in retirement.
At Willow Tree Financial Services, we're here to help guide you through your pension options, ensuring that you make the most of your retirement savings, no matter your age.
The value of pensions and the income they produce can fall as well as rise. You may get back less than you invested.
To book a pension review with us book directly onto my calendar here.
I also have an Introduction to Pensions video over on my YouTube channel:
Willow Tree Financial Services are a Financial Adviser based in Polegate, East Sussex, UK. We specialise in Financial Planning, Mortgages, Investments & Pension Planning, Protection & Insurance Wills, Trusts & Estate Planning.
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