How does a pension work?

There are choices you make in life that will have a huge impact on your future – getting an education, surrounding yourself with supportive people and picking a career. You can add starting a pension to the list. But before you start making choices, you need to know how a pension works.


Each payday, each year or as often as you like, you save some money into a retirement fund. Your fund is put away and invested. Its aim is to grow over time, so that when you finally decide to retire, you’ll have savings to live out your life with a good income – happily. That’s it. A pension is just a way of saving for the long term. But it’s different for two reasons: Tax and time


When you save money in a pension, you’ll probably get tax relief on it – so the real cost to you could be less than you might think. A lot less. You can save more, without it all coming out of your take-home pay.


The returns you earn on your investment are reinvested over and over, for years. That’s why starting a pension early makes sense; small amounts saved when you’re young can become very large by the time you retire.

And it’s important. Because one day you will want to retire. And the state pension will likely be a fraction of your current income. You won’t be able to do the things you want to do during your retirement.


Although pensions might seem complicated, the basics are easy. And the most important thing of all is to get in touch with someone who can help guide you through the process. Talk to us to get your future on track