Do you know that the government encourages everyone to save towards pension by having tax relief on contributions? Isn’t it great? Not just you make sure that with this long-term investment you have sufficient income on retirement, but you also earn more in the process. Doubting its possibility? Here’s how tax relief works.
For example, for every amount you save on a scheme, 20 per cent will be taken by your provider from the government. This 20 per cent basic rate will be the tax back.
Meaning to say, if you have a higher tax rate, definitely you will earn higher amount from tax back. And not to worry, even if you don’t pay tax you are still entitled with the basic rate of tax relief.
And to have tax relief from your pension contributions, you only need to apply for a personal pension scheme. This type of scheme is available to those whose:
- Unemployed but has the capability of paying into a plan
- Earning modest amount of income, but still wants to top up the amount they receive from a company pension
- Employer does not give any company pension scheme
- Capable of paying into a company pension but choose not to.