Imagine your salary was the UK Median (£30,023). Let’s take a look at how your monthly pay packet would look in a savings account vs your pension...
Savings vs pension
Your pension contribution (5%): Savings £0.00, Pension: £126.73
Your employers pension contribution: Savings £0.00, Pension £76.23
Savings (matching equivalent pension contribution): Savings £126.73, Pension £0.00
Total put away (monthly): Savings £126.73, Pension £202.77
Actual monthly cost to you: Savings £126.73, Pension £86.17 (after tax relief)
Take-home pay (after savings and pension contributions): Savings £1,900*, Pension £1,940*
While your money could sit in a savings account gathering interest and doing not very much, after 30 years invested in a pension, it could look like this…
Total contributions over 30 years: Savings £45,622, Pension £72,966
Total after 30 years: Savings £53,163 (based on savings account growth rate of 1%), Pension £154,414 (based on investment growth of 4.6%)
Remember, investments can go down as well as up and you might not get back all the money you paid in.
And while we’re here, let’s take a look beyond the numbers...
Advantages of savings account
Disadvantages of savings account
Advantages of pension account
Disadvantages of pension account
You can’t access your pension money until you’re 55