Answered by Andrew Jenkinson
When you start a pension, you make monthly contributions into the scheme. If you’ve joined your employer’s workplace pension, they will usually contribute to the plan on your behalf too.
Pension contributions and tax relief
These contributions also benefit from tax relief. If you’re a basic rate taxpayer, you’ll get 20p in tax relief for every pound you make in pension contributions. If you’re a higher rate taxpayer you’ll get 40p in tax relief for every pound you pay in and 45p if you pay tax at the 45% additional rate (accurate as of April 2017).
To calculate the tax rebate you’re due on your pension contributions, use the Drewberry Pension Contributions Tax Relief Calculator →
How your contributions are invested…
Contributions are then invested in the financial markets, such as the stock market, by your pension provider. The aim is that they will grow over time, leaving you with a big lump sum which can be used to provide you with an income once you retire.
Frequently Asked Pensions Advice Questions
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