What is pension?

cherry2017

I pay pension through nest pension, 
If I pay 1000/year, when I am retired after 30 years, how much can I get every month?
is it just 1000/12=83.3/month?
thanks

xylophone

If I pay 1000/year, when I am retired after 30 years, how much can I get every month?
is it just 1000/12=83.3/month?

  No. See

https://www.nestpensions.org.uk/schemeweb/nest/investing-your-pension/saving-for-your-future/pension-calculator.html

dunstonh

You will have the value of the contributions plus any growth.    That value is yours to spend whether you blow it in one go or spread it over the remainder of your life (the latter usually being the more sensible option).

Secret2ndAccount

You are building up a pot of money. It's a little bit like a savings account.  If you put in 1000/yr for 35 years then, very very roughly, you could expect to take out 1000/yr for 35 years. But it's better than that. The taxman really helps out with pensions.

I'm assuming that you are a basic rate taxpayer - that you earn between about 12,500 and 50,000 per year. Suppose you decided to take your 1,000 as salary instead of putting it into pension. The taxman would want his 20%, so you only get to take home 800, not 1,000. So your choice is 1000 into pension, or take home 800. Also, the money in your NEST is invested. Hopefully it makes a profit and grows. Once again, the taxman doesn't bother you - the profits are tax free. 

When you retire and want to take some money out, then the taxman does take a look. However, you get the first 25% tax free, and only pay any tax on 3/4 of the money. And possibly you won't be a taxpayer when you retire, so you might not pay any tax at all.
So instead of 800 in take-home today, you end up with something between 850 and 1000+ in pension tomorrow.

It's a good idea to put a little away every month for your retirement, unless you want to work until you are 90. Even if it's a bit hard now, you will thank yourself when you are more comfortable in later life.

cherry2017

Secret2ndAccount said:

You are building up a pot of money. It's a little bit like a savings account.  If you put in 1000/yr for 35 years then, very very roughly, you could expect to take out 1000/yr for 35 years. But it's better than that. The taxman really helps out with pensions.

I'm assuming that you are a basic rate taxpayer - that you earn between about 12,500 and 50,000 per year. Suppose you decided to take your 1,000 as salary instead of putting it into pension. The taxman would want his 20%, so you only get to take home 800, not 1,000. So your choice is 1000 into pension, or take home 800. Also, the money in your NEST is invested. Hopefully it makes a profit and grows. Once again, the taxman doesn't bother you - the profits are tax free. 

When you retire and want to take some money out, then the taxman does take a look. However, you get the first 25% tax free, and only pay any tax on 3/4 of the money. And possibly you won't be a taxpayer when you retire, so you might not pay any tax at all.
So instead of 800 in take-home today, you end up with something between 850 and 1000+ in pension tomorrow.

It's a good idea to put a little away every month for your retirement, unless you want to work until you are 90. Even if it's a bit hard now, you will thank yourself when you are more comfortable in later life.

Thank you so much for your clear and nice sample explaination.

Albermarle

A good resource for understanding about pensions is here .

Pensions and retirement | Help with pensions and retirement | MoneyHelper