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Should you put money in savings or pension? It depends exactly how old you are
This post was originally published on this site.
In a special edition of the savings guide, April Leeson, financial adviser at The Private Office, discusses whether earners should pay into pensions or savings accounts, alongside our usual top rates tables…
The balance between how much you deposit into a pension or cash savings depends heavily on what stage of life you are in, how much you can afford and what access you might need and when.
It’s advantageous for younger people to prioritise pensions for long-term growth because compound returns over decades mean they can afford to take more equity risk.
But savings should still be maintained as an emergency fund (with a pot worth three to six months of your expenses recommended).
Cash can also be vital for expenses like saving for a deposit on a home.
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For people in middle age, balance becomes key.
It’s important to keep building pensions but also to increase savings to create a buffer against risk when you begin making withdrawals.
You would normally earn more as your career develops, so you should have more available to put into your pension, and you could benefit even more from tax relief.
Cash savings are essential for retirees for covering short-term living costs, enjoying their retirement years and future healthcare needs.
Pensions remain important for long-term income, but withdrawals must be managed carefully so that you don’t unwittingly pay too much tax.
For a look at the best up-to-date savings options, see below – or scroll down to find out more about the pros and cons of savings v pensions…
Advantages of pensions
Long-term growth: Investments within pensions can usually outperform cash savings over the long run, helping to keep pace with or to beat inflation.
Tax benefits: Pension contributions usually receive tax relief at the basic rate of income tax or your own marginal rate, boosting the amount invested.
So, for each £80 invested, you’ll receive £20 tax relief. If you’re a higher rate or additional rate taxpayer, you can claim back the extra from HMRC through self-assessment.
You can save on national insurance contributions by contributing to a pension via salary sacrifice, too.
If you were to die before age 75, a pension can provide longer-term income tax benefits for your beneficiaries.
Pension funds grow tax-free: All returns are free of income tax (until you withdraw), as well as capital gains tax and dividend tax.
Company contributions: Your employer will pay into your pension, too.
Retirement income: Pensions are designed specifically to provide an income in retirement, for you and your spouse (on death), through structured withdrawal strategies, with a quarter of the pension being entirely tax-free – as a tax-free cash lump sum – up to a maximum of £268,275.
Disadvantages of pensions
Access restrictions: You usually cannot access pension funds until a set age.
Market risks: Investment returns fluctuate. Timing withdrawals badly can erode value.
Complexity: Managing pension investments often requires careful planning and regular reviews, as legislation changes and allowances move around.
Advantages of savings
Liquidity: Cash savings are immediately accessible, useful for emergencies or short-term needs.
Short-term returns: Higher interest rates mean cash savings
have become more attractive.
Personal Savings Allowance: For basic-rate taxpayers, up to £1,000 of interest can be earned tax-free per year. It’s £500 for higher-rate taxpayers.
Disadvantages of savings
Inflation risk: Over time, cash can lose value in real terms.
Taxable interest: Interest on large savings can push earners into a higher tax bracket without realising.
Lower returns: Savings accounts do not grow wealth like
investments or pensions do.
According to JP Morgan Asset Management, cash has been the worst-performing asset class against inflation since 1900.
Breaking News
O’Leary calls again for passenger cap to be abolished
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The chief executive of the Ryanair Group has renewed his call on the Government to abolish the passenger cap at Dublin Airport, which he wants scrapped before the end of the year.
Michael O’Leary accused the Government of “blatant inaction” and doing “nothing” to address the 32 million passenger limit, despite a pledge in the Programme for Government.
Earlier this month, the Transport Minister Darragh O’Brien said he will be bringing legislative options to Cabinet on lifting the cap.
But the Ryanair boss has criticised the move said any such legislation would not be passed until next year, which is too late.
“They have a 20-seat majority. Pass the legislation to scrap the cap before the end of December,” he stated.
Michael O’Leary also said while he does not know the detail of what is going on between daa chief executive Kenny Jacobs and the daa board, he said: “If it’s costing €1.2m to get him out of the position, frankly, they should keep him and get rid of the board.”
“You could get rid of the board for less than €100,000,” the Ryanair boss said.
“I think he’s been perfectly adequate as chief executive of daa. We do have major problems with the daa and their continued plan to build a tunnel under the airport that nobody needs, but he is as good as anybody else who’s likely to come in and replace him,” he said.
On the issue of drone disruption at European airports, including in Denmark, Michael O’Leary said drone flying over airports should be “shot down” or “electronically disabled.”
He also said the tourism industry is facing “considerable challenges” at the moment and he said a removal of the passenger cap will help in addressing the issues.
Mr O’Leary also urged the Government not to cut the VAT rate for the food-led hospitality sector from 13.% to 9%, which he described as “a scam.”
But he also said labour costs should not be passed onto the sector through an increase in the minimum wage, as recommended by the Low Pay Commission.
Breaking News
Café Sol pesto pasta and chicken recalled over listeria
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The Food Safety Authority has recalled a batch of Café Sol pesto pasta and chicken over the presence of listeria.
The impacted product has a use by date of 25 September 2025 and weighs 224g.
The FSAI said notices will be displayed at point-of-sale and urged those who purchased the product not to eat the affected batch.
Retailers have been requested to remove the pasta dishes from their shelves.
Distributors have been asked to contact their impacted customers, recall the affected batch and also provide a notices in their premises.
Symptoms of listeria monocytogenes infection can include mild flu-like symptoms, or gastrointestinal symptoms such as nausea, vomiting and diarrhoea.
In rare cases, the infection can be more severe, causing serious complications.
Pregnant women, babie, and people with weakened immune systems, including the elderly, are more vulnerable to such infections.
The time between initial infection and first symptoms appearing is on average three weeks but can range between three days and 70 days.
Breaking News
Swinney apologises to injured footballer over ambulance wait
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First Minister John Swinney has apologised to a young footballer who had to wait five hours for an ambulance after breaking her leg.
Brooke Paterson, 19, was injured while playing for Linlithgow Rose away at Cumbernauld United in North Lanarkshire on Sunday.
The central midfielder from Bo’ness, near Falkirk, has since undergone surgery in Forth Valley Hospital.
Speaking in parliament, Swinney apologised to Ms Paterson and expressed his “regret” at the situation.
The Scottish Ambulance Service (SAS) has also apologised for any distress caused by the delay in getting to the match, which it said was due to high demand and hospital turnaround times.
After the case was raised by Scottish Labour leader Anas Sarwar at First Minister’s Questions, Swinney said that it appeared the ambulance call had been misclassified, meaning it did not have “the priority it should have had”.
“That is not acceptable,” he said.
“That is an error that has been made and we have to look into whether that is the case and whether there are other steps that need to be taken to remedy that.”
Sarwar accused Swinney of having “broken the system” and said families across the country were suffering as a result of waits for accident and emergency treatment.
Ms Paterson said she ran to get the ball at the same time as a United player during the Lowland League match.
“She went for a slide tackle and I got the bad end of it,” she told BBC Scotland’s Drivetime programme.
“It just snapped straight away. I heard the snap and knew something bad happened.
“I just remember being in total agony and screaming and crying. I couldn’t focus – people were trying to talk to me and I couldn’t hear anybody. I was in a lot of pain.”
Teammates and onlookers at Guy’s Meadow Stadium rushed to her aid and several phoned for an ambulance after realising the seriousness of her injury.
“The ambulance said that it wasn’t a 999 emergency and I had to wait,” she said.
“The hours kept adding on and adding on, and I was getting more and more upset and frustrated. I was cold as well because I was lying on the ground.”
People covered her in jackets to keep her warm and comfortable as it got dark.
“I was more annoyed at the fact that they let me lie there on the wet grass, completely freezing with a bad injury,” she added.
“They took their time to come and get me. I just couldn’t believe they could do that to anyone.”
When asked if the apology from the SAS was enough, she said: “I don’t know.
“I don’t know that they won’t do that to someone else and it’s obviously happened before. An apology isn’t enough to fix these problems.”
It is not known when Brooke will leave the hospital, as she is still struggling with the pain as well as putting weight on the injured leg.
“I’m just really, really sore and tired all the time,” she said.
The footballer said she had suffered bad injuries before, adding: “I know I can come back from something like this, but I know it’s going to take a while.
“I just need to remember why I play football in the first place and that will keep me going. It’ll get hard at points but I can’t give up. I’ve came too far to give up on football now.
“When I’m playing football, all my worries go out the door. I don’t have any problems when I’m playing football. It’s always brought me joy no matter what.”
Ambulance apology
A SAS spokesperson said: “We would like to sincerely apologise to Ms Paterson for the delay in the ambulance response and for any distress caused.
“We can confirm that we received a number of calls on 21 September to attend this incident but due to high demand and hospital turnaround times which ranged between 90 minutes to three hours in the area, this significantly delayed our response and we unfortunately could not attend immediately.
“When a time is appropriate, we would ask Ms Paterson or her family to contact our patient experience team directly so we can look into this case further and personally discuss our response. We hope Ms Paterson is recovering well.”
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