It's important to think about how you can save for retirement if you want to have the financial liberty to enjoy your new-found freedom in later life. When you've stopped working, although you will receive a State Pension, this is unlikely to provide you with the comfortable standard of living you dream of.

How to begin saving

It's your responsibility to start building your retirement income, but where do you begin?

You should first work out your retirement income goals, how much you will need to live on, how long you have to save and also what kind of methods you will use to achieve your desired amount. Outlined below are some of the main vehicles savers use to generate their retirement income.

 

When's a good time to start saving?

You should begin saving for retirement as soon as you're earning enough. However, if you decide to start later, this just means you'll need to save more each month or year to achieve your goals. 
 

How can I save for retirement? 

Pensions

One of the main benefits of having a pension is that they offer tax relief on both the money paid in, and the money you take out.

Generally there are two kinds of pension: 

  • workplace
  • personal. 

Your workplace pension is a method of saving for retirement that is organised by your employer. The main advantage of a workplace pension is that not only do you make a contribution, but your employer does too. Your employer will contribute anywhere from 3% to 10% of your annual income per year. 

However, a lot of savers get an additional personal pension.

With a personal pension you can pay an amount per month or an initial sum to a pension provider who will then invest that money for you. You can change the amount you pay into a personal pension as your circumstances change and your provider will normally offer you numerous investment options – this makes a personal pension more flexible than a workplace pension. 
 

ISAs

A cash ISA is different from a normal savings account as you will not be charged tax on the interest you earn in this account, subject to an annual limit.

Higher rate tax-payers stand to benefit from ISAs as they can avoid being taxed at 40% on any interest accrued on savings, while standard rate tax payers will benefit by 20%.

Stocks and shares ISAs are free from income tax and capital gains tax which may be charged at a rate of 28% when you reach the annual threshold of £11,100.

However, it's possible to transfer money you have invested in the current year or previous years between stocks and shares ISAs and cash ISAs without losing the tax-free benefit, as long as you do not actually withdraw any money.

Furthermore, the current limit for money you can put away in an ISA is £15,240 in either stocks and shares or in cash.

 

 Click here to start an ISA or JISA with our partner Scottish Friendly 

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