For Claire Holt and Annie Shortland, prioritising pension savings has always made sense
For Claire Holt, prioritising pension saving has always made sense – even though she knows she cannot access the cash for at least nine years.
The 48-year-old knows that putting her money into a savings account – like an ISA – would give her more flexibility over when she withdraws her cash, but she says she’s convinced she’s taking the right option.
Based in Surrey, the communications adviser has been running her own limited company for the past 14 years, and for her, pension saving offers clear benefits over other forms.
Speaking to The i Paper, she said: “I run a limited company, so prioritising pension contributions is a no-brainer from a corporation tax perspective.
“I put around 15 per cent of my income into my pension each month. If I were to invest in an ISA, I’d have to pay tax on dividends first, which defeats the purpose.
“So, I don’t have any ISAs. I’ve always favoured pensions, particularly since becoming a director.”
“It’s always depressing seeing how much HMRC takes each year, so wherever I can protect something for my family’s future, I do,” she said.
She will not able to access the cash until she is 57, as in three years’ time the age at which you can access your pension will rise from 55.
The pay off is that paying into a pension has significant tax benefits, even when compared to an ISA.
Contributing to a pension through a limited company can bring significant tax advantages as contributions can be treated as a business expense, and offset against a business’s corporation tax bill.
This is a tax-free bonus that doesn’t come with ISAs, where you’re investing with post-tax income.
ISAs come with some tax benefits – you can put £20,000 a year into them and the profits you make from interest are not taxable – but you don’t get tax relief on paying into them.
Whereas with a pension the government makes contributions in the form of a tax refund. The amount you receive depends on your tax bracket, so if you’re a basic rate taxpayer you get a top up of 25 per cent, up to an annual limit.
Claire added: “I’ve got a great financial adviser, who also happens to be my husband. But we are careful. I’m naturally a saver, not a spender. I think balancing short-term flexibility and long-term growth is crucial.”
While Claire doesn’t have an ISA for long-term savings, she ensures she maintains working capital – money for day to day operations – within her business, offering her flexibility if she needs access to cash.
She explained: “I keep the working capital in the company, so it’s not all tied up in pensions. It’s about balance, and I’m comfortable with it.”
Annie Shortland, 27, is another person who has said building wealth for the future has always been a priority, even though she is at least three decades away from accessing her retirement savings.
Aiming to take full advantage of compound interest, she made the decision to focus her savings entirely on her pension three years ago, after researching the most efficient ways to save for the long-term.
The PR and marketing professional said: “I did a lot of research into long-term saving strategies, and it became clear that pensions were the most effective way to build wealth.
“The power of compound interest really works in your favour when you start early.”
Compound investing is concept that involves earning returns on both your original investment and on returns you received previously. If you start saving for retirement early, it means your gains can snowball.
Currently, Annie contributes 5 per cent of her salary into her workplace pension every month.
Her employer adds 3 per cent, further boosting her pension pot.
But she also pays 10 per cent of her earnings into a separate self-invested pension pot too.
Like Claire, she’s consolidated any pensions from previous employers into one pot, making it easier to track and manage.
She said: “I haven’t completely abandoned ISAs, though. I still have a savings ISA for my emergency fund, with three months’ worth of salary in there. But beyond that, I’ve focused solely on my pension for the past three years.”
Pensions are often viewed as “locked away” savings, but for Annie, it’s all part of the plan.
She continued: “I have my emergency fund in an ISA, which gives me peace of mind for short-term needs. But for anything long-term, my pension is the priority.
“I think my future self will thank me for prioritising long-term gains. But I can change my mind anytime if circumstances change. Right now, though, I’m focused on saving for the future.”
For both savers, pensions aren’t just about locking money away. They’re about tax efficiency, long-term growth, and building wealth that will serve them in retirement.
Annie said she is “always reassessing my approach”, adding: “I also know that saving into a pension is about building a habit.
“As long as I keep setting aside money for the long term, I’ll be in a good position for the future.”
Claire echoes a similar sentiment. She said: “As long as I can find a way to balance short and long-term needs, I’m happy with my decision. Pensions are the smart move for the future.”
