When money’s tight, or an unexpected bill turns up, paying into your pension can feel like a luxury. And it might seem like the first thing to cut back on. But before you do – here are a few things to think about.

Why should I pay into a pension?

If you’re employed and meet certain criteria, you’re automatically enrolled into a workplace pension scheme. Paying into a pension now, while you’re working, simply means you can have an income when you’re not. The sooner you start, the longer your savings have time to grow, and the more you’ll build up.

Your employer will usually also pay into your scheme. So, leaving is like turning down part of your pay.

There is a minimum amount that employers must pay by law, but many pay more than that. Find out exactly what your employer is paying into your pension scheme before you give that up.

You might also get tax relief on your pension contributions. This means either:

• you pay less in tax because your pay is reduced by the amount  being contributed to your pension before you are taxed, or
• money that would have gone as tax goes into your pension scheme.

It depends on the type of scheme you have. As an example, if you pay basic-rate tax (20%), a £100 contribution will cost you £80. If you pay tax at a higher rate, it will cost less than this. 

Will it make much difference if I stop paying for a couple of years?

You’d be surprised at how much you could lose out on in terms of contributions from your employer and tax relief and investment growth.

Also, if you leave your scheme you might lose valuable benefits paid to you if you were ill or paid to your dependants if you died.

I don’t want to stop working – so do I need a pension?

You might think that now, but no-one knows what the future holds. You might change your mind.

Even if you don’t want to stop working, having a pot of savings you can take money from when you are older gives you more flexibility in how you can live your life. And it means you can keep doing the things you enjoy doing now.

Also, there are lots of ways to take money from your pension savings once you’re 55 (this increases to age 57 in 2028). No savings means less choice later.

I’ll get a pension from the government – why should I have to pay twice?

The full amount of the State Pension for people reaching State Pension age during 2023/24 is £203.85 per week. If you want more than that to live on, it’s worth having other pension savings.

The State Pension age is increasing from 66. And many people won’t be able to get their State Pension until they are 67, 68 or even older.

You can currently begin taking the money in your private pensions savings from age 55. This increases to age 57 in 2028.

My property will be my pension

Even if you’re lucky enough to be able to buy your home and pay off your mortgage before you want to stop working, you’ll still need somewhere to live.

Downsizing can work for some people and can release some cash. But will that be enough to provide you with an income for the rest of your life? 

What else can I do?

If you’re worried about money, talk to your employer to see if you can lower the amount you contribute.

Employers have to pay at least 3% of your qualifying earnings on your behalf, but many pay in more. This means you might be able to pay in less, rather than stop altogether. But it might be a good idea to make a commitment to increase it again later.

Your savings will always be yours

If you do decide that leaving is the right option, then don’t worry. Your pension savings will be safe and will always belong to you – even the amounts your employer paid in.

If you change jobs, you might be able to take your pension savings with you to your new employer’s scheme, or leave them where they are. But it’s important not to forget about them.

You can ask your employer to re-join their pension scheme at any time. But they might not put you in the same scheme you were in before with the same contribution levels and benefits. Some employers will also only re-enrol you at a certain time in the year, so there might be a delay. Most schemes will allow you to increase your contributions whenever you want, but not all employers and providers can offer this. If they can't you might need to set up a personal pension separately in order to do this.