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4 reasons to love your pension (not just on Valentine's)

We look at why you should love and care for your pension.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

This article is more than 6 months old

It was correct at the time of publishing. Our views and any references to tax, investment and pension rules may have changed since then.

Realise it or not, you and your pension are in a long-term relationship.

But with over half (54%) of workers not knowing how much their pensions are worth, and according to our own research only one in four (26%) knowing where they’re invested, it seems things might be more than a little on the rocks.

If you’re taking your pension for granted, this article could help reignite that magic spark this tax year (2019/20).

Remember this article isn’t personal advice. If unsure, please seek advice. Money can’t usually be taken out of a pension until at least age 55 (57 from 2028). Scottish rate tax payers have different tax rates and bands. All pension and tax rules can change, and benefits will depend on your circumstances.

1. The more you give your pension a chance to grow, the more you’ll likely get in return

Each time you pay money into your pension it gets topped-up by the government (known as tax relief). This is one of the main perks that makes pensions so attractive.

At the moment, if you’re a non-taxpayer or a basic rate taxpayer you’ll get a 20% top up. Which means, to save £3,000 a year into your pension, you’d actually only need to pay in £2,400 (or £200 a month). The government will add the extra £600 automatically. And if you pay tax above the basic rate not only will you get the 20% top up, you can usually claim more tax relief through your tax return.

But with pension tax relief costing the Treasury around £35 billion a year, there’s rumours this perk could be cut in the next Budget (11 March).

Pension tax relief calculator

Start or top up your HL pension today

2. Workplace pensions are like a pay rise

To help people save more for their retirement, employers must automatically put eligible workers into a workplace pension scheme.

If your work gives you access to a pension that your employer will pay into, then choosing to stay out of it and not contribute (unless you really can’t afford to) is like turning down a pay rise.

Some employers might even contribute to your pension regardless of whether you pay into it. If that’s the case, seriously consider joining the scheme whatever your financial circumstances. It could make all the difference when you come to retire.

It’s worth remembering money in a workplace pension can’t usually be taken out until you’re at least 55 (57 from 2028), and the value of your pension will rise and fall over time, unlike money in a savings account, so you could get back less than you put in.

More on workplace pensions

3. Your pension won’t be ‘fine’ without your attention

People can change and grow. The same is true of your pension investments (except all investments can go up and down in value, so you could get back less than you invest).

That’s why it’s so important that you show an interest in how things are going. You might find that an investment doesn’t match your personal values or goals anymore, maybe a particular investment is underperforming, or maybe the charges have changed.

The point is, if you regularly review your plan, including your investments and the income you’ll need in the future, you should be able to spot issues early and take steps towards getting back on track sooner.

Learn more about investing

4. It won’t get angry if you forget your anniversary

Every year, you should receive a letter from your pension provider(s) with a statement detailing where you’re invested, charges for the year and performance figures. It should also give you an estimate on how things might look when you reach 65 (or your expected retirement age).

If you have more than one old pension dotted around, and so more than one anniversary to remember, you might decide bringing them together under one roof could make your life easier. And you can do this with HL. You’ll know exactly how all your investments are doing at the same time, and only have one provider to deal with.

Just check you won’t lose any valuable benefits or need to pay high exit fees before transferring.

Cashback Give your old pensions a new home.

Save time and money by managing all your pensions together in one account: the HL SIPP. Act by 30 April and receive cashback as a thank you. Terms apply.

Find out more

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

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