Saving for retirement

The sooner you start to save for your retirement the better. Don’t just rely on the State Pension, you need to build up retirement savings too.

The State Pension in the 2018/19 tax year is worth a maximum of £164.35 a week.

£164.35 a week is unlikely to deliver the kind of income you need to sustain a comfortable standard of living once you’ve stopped working.

Saving for retirement might seem a while off, but it is one of the most important financial decisions you’ll make.

How you save for retirement depends on whether you’re employed, self-employed or not employed. Click each option below for more details.

Saving for retirement if you're employed

If you’re employed, aged between 22 and state pension age, earning at least £10,000 a year and you usually work in the UK you’re likely to have access to a workplace pension. Your employer is now obliged to opt you into the scheme, unless you chose to opt out.

Once you’re in your employer must contribute a minimum of 2% of your salary, which is added to your minimum contribution of 3% of your salary.

Some employers may have a more generous scheme.

A workplace pension can come in two forms, defined contribution and defined benefit, most people will have a defined contribution pension.

Defined Contribution Pension

The pension you receive in retirement is based on how much you and your employer have paid into the scheme and how well the investment has grown during your working life.

Defined Benefit Pension

The pension you receive in retirement depends on the number of years you have been in the scheme and your salary near retirement. Defined benefit pensions are not reliant on investment growth.

Saving for retirement if you're self-employed

If you're self-employed you're responsible for building a pension pot on your own.

For their retirement plans most self-employed people use a personal pension, as contributions receive tax relief from the Government (within certain limits).

The pension you receive in retirement is based on how much you paid into the scheme and how well the investment has grown during your working life.

There are various types of personal pensions, and the one that is right for you will depend on a number of factors.

It’s a good idea to speak to a Financial Adviser about the different options available and to make sure your retirement plans are tax efficient.

Saving for retirement if you're not employed

If you’re not employed you can still save for your retirement. You can contribute up to £3,600 into a personal pension each year tax and receive relief on those contributions.

The pension you receive in retirement is based on how much you paid into the scheme and how well the investment has grown.

It’s a good idea to speak to a Financial Adviser about the different options available and to make sure your retirement plans are tax efficient.

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There are risks involved with investing. The value of your investments and any income from them can fall as well as rise and you may not get back the amount you originally invested.

HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen.

Newcastle Building Society introduces to Newcastle Financial Advisers Limited for advice on investments, pensions, inheritance tax planning, and protection planning. Newcastle Financial Advisers Limited is an appointed representative of Openwork Limited which is authorised and regulated by the Financial Conduct Authority.