Why it could pay to top up your workplace pension

So the great news is you’ve taken the first step, and are already a member of a workplace pension scheme.

This means you’re taking advantage of any contributions your employer makes into your plan. And the more you contribute (within limits), the more your employer might too – so it’s a win-win!

Long-term, this opportunity to receive increased employer contributions could really help shape your future retirement plans.

So it's worth having a conversation with your employer to understand their scheme rules about how much they'll contribute if you wish to top-up your regular payments. This may be up to a certain percentage of your salary.

Let's also look at a simple example of how topping up your workplace pension plan could make a difference. 

There are various ways you can boost the benefits of your workplace pension plan.

What difference could it make?

For example, over a 20 year period, if you contribute £80 per month (which then gets £20 per month basic rate tax relief added, totalling to £100 a month), this amounts to £24,000 invested. Assuming your employer matched contributions at £100 per month, this gives you a potential pot of £48,000.

So, over the period you've contributed £19,200; the taxman would have contributed £4,800; and your employer has contributed £24,000. The tax relief benefit is even better if you pay above basic rate tax (although only basic rate relief will be added into your pension pot).

In addition to this, the more you've paid into your workplace pension plan, the more the taxman may provide in tax relief, subject to government limits.

You can also use this free workplace pension calculator to help see the effect of contributions into a workplace pension plan.

Please remember that the value of your pension fund can go down as well as up and so you might get less than what you put in.

How do I top up my workplace pension?

There are various ways you can boost the benefits of your workplace pension plan (to find out more refer to the key features of your own workplace scheme).

  • Speak to your employer about topping up your workplace pension.
  • 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 workplace scheme.
  • You can set up an individual pension arrangement to supplement your company pension. 

If you're thinking of making changes to your plan, including adding more money, it's really important you speak to a financial adviser. They can help you understand if what you want to do is right for you and your aims and circumstances, that may have changed since you took your plan out. They'll be responsible for the advice they give and you'll also have protection from the Financial Ombudsman Service.

Regardless of whether you’ve taken advice, you can refer any matter to the Financial Ombudsman Service for consideration should you feel that you haven't been treated fairly, or for any other aspect under the Financial Ombudsman Services remit.

This is for illustration only and is based on our current understanding of current tax legislation and HM Revenue & Customs practice, both of which may change without notice. The impact of taxation (and any tax relief) depends on your circumstances.

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