Why it could pay to top up your company pension
If you are a member of your company pension scheme your employer would normally, at least, match your contributions.
If for example you were to pay in £100 per month, your employer would contribute £100 too.
By paying into your company pension you could be taking advantage of their contributions.
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.
By paying into your company pension you could be taking advantage of their contributions. And by topping up, you could make the most of it.
What difference could it make?
For example if you contributed £100 per month (which includes £20 basic rate tax relief) over 20 years, assuming your employer matched your contributions, this would give you a potential pot of £48,000. Broken down, this means you'd contribute £19,200; the taxman would contribute £4,800; and your employer would contribute £24,000. This would be more if you earn above the basic rate of tax.
In addition to this, the more you've paid into your pension, the more the taxman may provide in tax relief, subject to government limits.
Please remember that the value of your pension fund could go down as well as up and so you may not get back what you put in.
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).
- Speak to your employer about topping up your company 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 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.
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 individual circumstances.
Tax benefits of saving in a pension
Saving in a pension is a tax-efficient way of building up an income for retirement.