We're always told that planning for your future is one of the most important things and pension contributions are the single best way you can do this planning. You're told by the government, every financial advisor and every finance YouTube channel about the importance of putting money towards your pension. Many recommend you contribute much more than the minimum requirement of 8%. I am generally a big proponent of financial planning and I agree that planning for retirement is very important. But it's also really important to be aware of the fact that if you save too much into your pension, it can be a really bad thing. The UK Government has introduced a Lifetime Allowance for pension pots which sounds very high - it is over £1,000,000. But although that sounds crazy, if someone one a median wage contributes the minimum amount from 21 to 68 which is the current target retirement age, their pension pot will actually be bigger if it grows at an average rate of 8% per year. If you happen to earn more than the median wage for a good chunk of your career or your investments do better, your pension pot could be much bigger than that. And if it is... the UK Government will tax you 55% of any amount over the limit if you take it out as cash or 25% if you buy an annuity... before then taxing your annuity as income as well. Unfortunately this is something that just doesn't get mentioned at all when people talk about pensions and given that this may actually apply to a significant number of people as it stands, it's important to take it into account when you're making your financial decisions. ☕️ JOIN MY PATREON - DISCORD, BONUS VIDEOS, TARGET PRICES, MODELS & MORE 💵 GREAT INVESTING APPS I USE INTERACTIVE BROKERS (Global - Main investing app I use) GET A FREE SHARE WORTH UP TO £100 WITH TRADING 212 (UK & Europe) You need to sign up and make a deposit within 10 days to get a free share. GET A $10 BONUS WITH LIGHTYEAR (UK & Europe) You need to use promo code "Sasha" and the bonus is awarded after your first trade. DISCLAIMER: Your capital is at risk. DISCLAIMER: Some of these links may be affiliate links. If you purchase a product or service using one of these links, I will receive a small commission from the seller. There will be no additional charge for you. DISCLAIMER: (For Lightyear affiliate link) The provider of investment services is Lightyear Financial Ltd for the UK and Lightyear Europe AS for the EU. Terms apply: golightyear.com/terms. Seek qualified advice if necessary. Capital at risk. DISCLAIMER: Trading 212 provides execution-only service. This video should not be construed as investment advice. Investments can fall and rise. DISCLAIMER: I am not a financial advisor and this is not a financial advice channel. All information is provided strictly for educational purposes. It does not take into account anybody's specific circumstances or situation. If you are making investment or other financial management decisions and require advice, please consult a suitably qualified licensed professional....(read more)
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Why You Shouldn't Pay Into Your Pension (UK) Pensions have long been touted as a crucial way to save for retirement in the UK. The government incentivizes pension contributions by offering tax relief on these payments, making pension plans an attractive option for individuals looking to secure their financial future. However, there are arguments against paying into a pension plan that shouldn't be ignored. One reason why paying into your pension might not be the best choice for some is the lack of control over your investments. When you contribute to a pension, you are handing over your money to a pension provider, who will then invest it on your behalf. This means you have limited say in how your funds are allocated and which investments are made. With the lack of control, there is also the risk associated with pension investments. While pension providers may promise high returns, there is no guarantee that these expectations will be met. Your hard-earned money could potentially be tied up in poorly performing investments, resulting in a lower retirement income than anticipated. Another drawback of paying into a pension is the rigid access to your funds. Under current UK pension regulations, you cannot access your pension savings until you reach the age of 55, and this limit is set to increase to 57 in 2028. If you have more immediate financial needs or wish to retire earlier, paying into a pension may not be the most flexible option. Furthermore, the future of pensions in the UK remains uncertain. Government policies can change, leading to alterations in pension regulations, tax relief, and retirement age. It's important to consider whether relying solely on a pension for retirement income is a wise decision, given the potential for unexpected changes in the future. Instead of relying solely on a pension, some individuals prefer to explore alternative investment options. These options may include investing in properties, stocks, or starting a business. By diversifying investments across multiple asset classes, individuals can spread their risk and potentially benefit from higher returns than relying on a pension alone. Additionally, for those who prioritize flexibility, other savings vehicles may be more suitable. Individual Savings Accounts (ISAs) are a popular choice for UK residents since they allow individuals to save and invest money tax-free. Unlike pensions, ISAs offer more control over investment decisions and enable easy access to funds at any time. Ultimately, the decision of whether or not to pay into a pension is a personal one. It depends on individual circumstances, risk appetite, and long-term financial goals. While pensions have been championed as one of the most effective ways to save for retirement, it's important to thoroughly assess the pros and cons before committing to a pension plan. Exploring alternative investment options and considering the potential risks associated with pensions can help individuals make informed decisions about their financial future. https://inflationprotection.org/reasons-why-it-is-not-necessary-to-contribute-to-your-pension-uk/?feed_id=121150&_unique_id=64c0eb59ef642 #Inflation #Retirement #GoldIRA #Wealth #Investing #bestpensionplansuk #bestukpensionplans #bestukpensions #investinguk #openapensionuk #pensionadvice #pensionadviceuk #pensiondrawdownuk #pensionuk #pensionvsisa #retirementplanning #ukpension #UKpensionadvice #ukpensionage #ukpensiondrawdown #ukpensionlifetimeallowance #ukpensionpot #ukpensiontax #ukpensiontaxrelief #ukpensionsexplained #ukpensionsexplainedsimply #workplacepensions #workplacepensionsuk #RetirementPension #bestpensionplansuk #bestukpensionplans #bestukpensions #investinguk #openapensionuk #pensionadvice #pensionadviceuk #pensiondrawdownuk #pensionuk #pensionvsisa #retirementplanning #ukpension #UKpensionadvice #ukpensionage #ukpensiondrawdown #ukpensionlifetimeallowance #ukpensionpot #ukpensiontax #ukpensiontaxrelief #ukpensionsexplained #ukpensionsexplainedsimply #workplacepensions #workplacepensionsuk
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