Pensions: ‘sooner rather than later’

Start them young

When it comes to financial planning, there’s definitely such a thing as starting too late. The sooner you set up your pension, the more comfortable you’ll be when you need it. Kris Amliwala of Designer Wealth Management wants to make it easier

to understand WORDS BY TOM YOUNG

It’s possible you haven’t given your pension much thought. If you were automatically signed up to one when you joined your company, your mindset might’ve been: “I’ve got one – that’s good enough for me.” Kris Amliwala thinks differently. Designer Wealth Management likes to remove the formalities typical of financial planning.

“I avoid jargon, 100-page spreadsheets, and all the boring stuff,” says Kris. “We like to make it as clear and friendly as possible.”

This easy-to-follow, simplified approach is why Kris has been invited onto many podcasts, such as Financial Planner Life and The Kinder Institute of Life Planning. He has also been asked to speak at NextGen Planners Global Financial Planning Conference – the largest conference of its kind – two years straight, with his ideas streamed to six continents. Now, he’s turned his attention to a younger audience, raising awareness of some pension features we all should know.

“The sooner you start, the more you’ll have. Albert Einstein said: ‘Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn’t, pays it.’ This starts with the government giving you 20% tax-relief on personal pension contributions, up to a limit based on your individual circumstance.”

It’s worth understanding the figures. If you put away £1,000 per year, the government will give you an additional £250 – that helps you build for the future. It’s also an incentive to get set up as soon as you can, as the more years you contribute, the more potential tax-relief you could get.

You can’t set up a full pension until you’re 18, but there’s something else that parents can do even sooner. A junior pension can be set up from the day you get your birth certificate. Parents can pay into it on their child’s behalf until they turn 18.

“If they pay in £2,880 a year, the government will add another £720 for a total of £3,600 per year. Do that for 18 years and by the time the child turns 60, that would have grown to £219,600! And that’s before any additional investment growth.”

If that wasn’t enough, pensions also have another big advantage: should the worst happen, they’re tax free.

“Modern pensions are considered outside of your estate, so the money could potentially transfer to your children, without them needing to pay 40% inheritance tax. This gives pensions an advantage over ISAs. If you passed away, more money would go to your family, tax free.”

You can find financial resources and more information on pensions at dwm.uk.com.

THE SOONER YOU START, THE MORE YOU’LL HAVE