Pension alert: Britons urged to use ‘most profitable’ retirement option for 2022 | Personal Finance | Finance

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Pension saving is usually undertaken through a company arrangement, or through personal mechanisms. Either way, planning towards one’s retirement is key, especially if a person has significant goals or plans to achieve later in life. Experts have warned Britons should not rely on the state pension, increasingly viewed as a mere safety net, and instead take action to ensure they have money put aside.

In this sense, one personal finance expert has pointed individuals towards an option which could have potentially lucrative outcomes.

Adam Lowery, personal finance expert at BestInvest has said saving into a pension could enable Britons to benefit from “free cash”.

He explained: “For many workers, saving into a company or personal pension is the most profitable form of saving.

“Although funds cannot be accessed until pension age (which goes up from 55 to 57 in 2028). 

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This will be in addition to to 20 percent top up, showing how lucrative this action can end up being for Britons. 

This is not the only benefit of saving into a pension, and individuals could also benefit in other ways.

Those saving into a company arrangement could also gain additional financial support due to the way many schemes are set up.

As a result of auto-enrolment, employers will pay a minimum of three percent of a person’s salary into their pension.

But many companies will also take this a step further to match employee contributions.

Mr Lowery has described this as “another source of free cash” which pension savers can benefit from.

However, the financial expert also warned Britons to be wary as there are rules in place with regard to pension payments.

Individuals can contribute up to 100 percent of their earnings to their pension each year, or up to the annual allowance of £40,000 in the current tax year.

This means the total sum of personal contributions, employer contributions and Government tax relief cannot exceed the £40,000 allowance.

Those who exceed this allowance will be subject to a tax charge, which could be hefty.

In most cases, a person would have to pay the annual allowance charge from their income. This can usually be achieved through a Self Assessment tax return due to HMRC. 

In addition, they would not receive any tax benefits on the sum above the limit.

Consequently, Mr Lowery has urged Britons who are approaching this limit to be cautious.

He recommended financial advice for those who are wary of breaching the allowance. 





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