Pensions

There seems to be a lot of confusion about pensions and how they work, with people either not saving for their retirement or preferring to invest in property rather than a pension.
To allow you to understand how effective a pension can be, look at the following example: -
Mr Smith contributes £100 per month into a pension. It is invested in a very cautious fund (see investments) and at the end of the year the fund has not grown at all. What is the value of Mr Smith’s pension now?

Answer: £125, as the Government puts £25 into Mr Smith’s pension by way of a tax rebate – this applies even if you do not pay any tax!

Even if the fund does not perform, the tax rebate the Government gives you is the equivalent of an annual growth of 25%.  If your Financial Adviser helped you select a fund that had even a modest growth then the growth would be even more.

And if that was not enough, the fund will have special treatment so that it will be allowed to grow without being taxed, which is not the case with your buy-to-let property that will be subjected to capital gains tax.