Why it pays to top up your company pension
In some company pension schemes your employer will normally at least match your contributions. If for example you were to pay in £100 per month, your employer would contribute £100 too.
Matching your contributions in this way will depend on the scheme rules, and if they do match what you pay in, they may only contribute up to a certain percentage of your salary.
But if your company does offer this, it's worth thinking about. By paying in to your company pension you'll be taking advantage of their contributions. And by topping up, you could make the most of it.
Example
By topping up, your employer pays more into your pension and you end up with an increase of £28,800.
For example if you contributed £100 per month (which includes £20 basic rate tax relief) over 20 years, your employer would have paid in £24,000, giving you a total of £48,000.
But if you topped up your contributions and started paying £130 per month after four years, then £170 per month at year eight, then £200 per month at year 12, and finally £230 per month at year 16, this would give you a total contribution of £76,800. This includes £38,400 paid in by your employer who has matched your contributions .
By topping up, your employer pays more into your pension and you end up with an increase of £28,800. In addition to this, the more you've paid into your pension, the more the taxman has provided in tax relief.
The example should not be taken as a recommendation. It is for illustration purposes only. It assumes all earnings are taxed at 20% as a basic rate taxpayer. In reality some income would remain untaxed at the basic rate. It also assumes your employer matches your contributions.
Speak with your employer to find out more about topping up your company pension.
How do I top up my company pension?
There are various ways you can boost the benefits of your company pension scheme (to find out more refer to the key features of your own company scheme).
- You can increase your contributions within the scheme.
- You can supplement your contributions through an additional voluntary contributions (AVC) plan, although your employer may not match any contributions through this. This is an individual policy that aims to boost the benefits of your company scheme. You can see the benefits of contributing to an AVC plan with our AVC calculator.
- You can set up an individual pension arrangement to supplement your company pension.
- If you are unsure speak to a financial adviser - find an adviser.
