Understanding Your Pension: A Beginner's Guide

Pensions might seem boring or confusing, but they're secretly one of the best financial tools you have. Free money from your employer and the government? Yes please.

Why Pensions Matter

Free Money (Really!)

Employer contributions: Most employers match what you put in, up to a certain amount. If you don't contribute, you're leaving free money on the table.

Tax relief: The government adds money to your pension through tax relief. Basic rate taxpayers get 25% added automatically.

Example: You earn £30,000 and contribute 5% (£1,500)

• Your employer adds 3% (£900)
• Tax relief adds £375
• Total in your pension: £2,775
• Your actual cost: £1,500

That's an 85% return before any investment growth!

Types of Pensions

Workplace Pensions

• Set up by your employer
• Contributions taken from your salary
• Often includes employer matching

Personal Pensions/SIPPs

• You set up yourself
• More investment choice
• Good for self-employed or additional savings

The State Pension

• From the government
• Currently £11,502/year (full amount)
• Need 35 years of National Insurance contributions

How Much Should You Save?

A common rule of thumb: take your age when you started saving, halve it, and save that percentage of your salary.

Started at 25? Save at least 12.5% Started at 35? Save at least 17.5%

This includes employer contributions.

The Power of Starting Early

The earlier you start, the less you need to save overall.

To have £500,000 at 67:

• Start at 25: Save £300/month
• Start at 35: Save £600/month
• Start at 45: Save £1,250/month

Time really is money when it comes to pensions.

Common Pension Mistakes

1. Not Checking Your Old Pensions

Average person has 11 jobs—that could be 11 pension pots! Track them down.

2. Staying in Default Funds

Check what you're actually invested in. Default funds aren't always optimal.

3. Ignoring It Until Later

"I'll think about it when I'm older" is the most expensive mistake.

4. Not Maximising Employer Match

Always contribute enough to get the full employer match.

Your Action Steps

1. Find all your pensions - Use the government's Pension Tracing Service
2. Check your contributions - Are you getting the full employer match?
3. Review your investments - Understand what you're invested in
4. Increase contributions - Even 1% extra makes a difference over time

Need Help?

Pensions are one area where professional advice really pays off. A small change to your pension strategy today could mean tens of thousands more in retirement.

Book a pension review with our team to make sure you're on track.