Now, I know what you might already be thinking; this article is being put out there by a provider of SIPP and SSAS pensions, so of course we’re going to big up pensions! However, there’s no denying that getting the best return from your savings in recent times has changed. We all know the days of putting some spare cash into an account, leaving it to one side and allowing generous interest rates to simply take care of the rest, are long gone and its unlikely this will be a viable option to maximise your return for quite some time, especially with ongoing economic uncertainty thanks to our messy divorce with Europe.
And yes, there have been a few green shoots recently. Average rates on a notice account with gross savings of £10,000 have reached a five year high (0.86% in Jul 18 vs 0.78% in Jul 13) and ISAs are also starting to enjoy more generous rates. But even still, these are small gains to be had.
So why is a pension best then?
It’s simple really. Savings into a pension are not only tax-free but if you’re in employment, you can also benefit from getting extra money added on by your employer and the government, so really it’s a win, win situation and one that isn’t going to be affected too much by wider economic issues.
Take this recent IFS report for instance which found that using salary sacrifice in combination with employer matching, an ordinary basic- or higher-rate taxpayer can reach the level of wealth provided by an ISA at less than half the upfront cost.
But it’s not without its risks and you do need to exercise caution, especially when it comes to checking the fees your provider is charging. An honest and reputable provider like, ahem, us, will always be upfront about these fees so you can quickly factor this in when trying to calculate your return.
So if you’ve got spare cash, hopefully you know a bit more about how to make it sweat harder for you, and before you do anything, always consider the advice of a regulated financial adviser and be sure to check the small print before you start a scheme with a new provider.