When should I start saving for retirement?
As soon as you possibly can. The more time you are investing for retirement, the more you will benefit from compound interest. Compound interest is where you earn money on your interest – for example if you earn 5% on £1,000 in one year, you will earn interest on £1,050 in the second year and so on.
Remember, you get tax relief from the government at your marginal rate. If you are a basic rate taxpayer, the government will give you 20% more, so £246 becomes £307. If you are a higher rate or payer, the tax relief is even more attractive at 40%.
How do I save for retirement?
The most tax-efficient way to save for retirement is via a pension. This could be your workplace pension or a personal pension. If you’re employed, speak to your employer about your workplace pension and if you’re self-employed, you can get support from your accountant or financial adviser.
If you choose to save money from your net salary (after tax, National Insurance and other deductions) you could look at ISAs because there is no tax charged on withdrawals, but advisers are likely to encourage you to make the most of your pension contribution allowances first because of the tax relief available.