Pension contributions versus savings account

forlorna

I know I need to save more towards retirement. I have a workplace pension with matched employer contributions. What I want to understand is - if I want to put extra money away which is the best use of my money? Popping it into a savings account each month, or adding the amount to my workplace pension as voluntary contribution? Simple answers please- financial terminology is not my strength 🙂

Albermarle

Normally pension is better as you benefit from tax relief . However the pension is not accessible until your mid/late fifties but if you are wanting to save for retirement then that should not be a problem.
One thing to be aware of though is that within a pension your money is in investments and normally there is a choice . If you do not make any choices the pension chooses for you . This choice might not be the best for you and may affect how much is in your pot when you retire.
If you could tell us your age and the name of the workplace pension provider that would be useful .

forlorna

I'm 50 and it's a scottish public sector pension - lothian pension fund

OldBeanz

You are a member of the Local Government Pension Scheme. Assuming you want to increase the cash you receive when you draw your pension then you should consider an AVC. Pay in taxable income and receive tax-free income or a boost of 25%. It is one of the best features of an already good pension.
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How you can use your AVC

The different ways you may be able to use your AVC plan when you retire are:

• Take up to 100% of your AVC plan as tax free cash

  If you take your AVC at the same time you take your main scheme benefits you can take up to 100% of your AVC plan as tax free cash (as long as your total lump sums from the LGPS do not exceed 25% of the combined value of your benefits including your AVC plan, or 25% of the lifetime allowance (£268,275 for the year 2020/21), or 25% of your remaining lifetime allowance if you have previously taken payment of any pension benefits)..."