The benefits of topping up your individual pension
The more you can pay into your pension the more you're likely to have in retirement. So topping up your pension contributions may make sense for you.
Example
As a basic rate taxpayer, for example, if you paid £80 per month into your personal pension, the taxman would add another £20 in tax relief. Over 20 years this would add up to a total pension contribution of £24,000.But if you top up your contributions you can make a big difference. If after four years you increase your monthly payment to £110, and then at year eight to £140 per month, followed by £170 a month at year 12, and finally £200 a month at year 16, the total contribution with tax relief would be £42,000. That's an increase of £18,000.
Note this example simply illustrates contributions and does not take into account changes in the value of your fund due to investment performance or charges. It also assumes tax rates remain unchanged in the future.
Please note that the value of your fund may fluctuate and you may not get back the value of your original investment.
Topping up - the earlier the better
Topping up your pension can boost your income in retirement. But the earlier you start the more time you give your fund to grow.
The table below shows how much bigger your fund could be, depending on your age, if you added an extra £100 per month until you were 65.
And if you added an extra 5% to your premium every year (automatic premium increase - API) your fund could be even larger.
| Your age today | Age 33 | Age 38 | Age 43 | Age 48 | Age 53 |
|---|---|---|---|---|---|
| Fund total after paying £100 per month | £137,000 | £96,600 | £65,800 | £42,800 | £25,500 |
| Total fund after paying £100 per month plus 5% API | £256,000 | £165,000 | £102,000 | £60,800 | £32,800 |
These figures are only examples and are not guaranteed. What you will get back depends on largely how your investment grows. Illustrated fund values are calculated based on gross premiums of £125 being invested. Gross premiums are based on tax relief of 20% and assume premiums are paid until 65. The illustration assumes futures investment growth of 7% per annum and an annual charge of 1%. These values are solely in respect of top-up premiums only. Please note that your fund value may fluctuate and you may not get back your original investment.
Take action
Firstly, please read your plan literature.
If you're thinking about topping up your pension the sooner you start the better.
If you have a personal pension with Prudential and are thinking about topping up your contributions just call us on 0845 073 4000 (between 9am and 6pm Monday to Friday). Prudential also offers an automatic premium increase facility allowing you to increase your payments automatically every year. Read more about Prudential's Personal Pension.
