May 11 2016
Pension contributions can help you save tax!
Tax evasion has always been one of the biggest crimes. So are there ways in which you can save tax without having to go to the bars? Thankfully, the answer is yes. One of the best ways to save tax is through transferring an amount of your income to savings. As soon as you transfer the amount to your pension fund, you can easily get that deduction from your income. You will then have to pay tax on the net amount after deduction of that amount transferred to apension.
How is pension contributions calculated?
While pension contributions are generally calculated by the company you are working for, there are other ways to do so as well. There are different online pension contribution calculators present on the online portals of different financial institutions. They will not only help you to calculate the amount of savings on tax but also give you a brief idea regarding the amount that will get accumulated as your pension amount at the end of your career. Thus, you can easily go online and get the amount of pension and the tax savings calculated as per your requirements.
Tax savings with pension contributions
One of the biggest benefits of pension contributions is that you can save a lot of tax. If you are transferring an amount of your income into the pension fund, it is directly getting deducted from your salary. When you have to pay tax on the income, you will have to pay tax on the gross amount and not the net amount. Thus, this pension is totally exempted from tax. This ensures that you not only save for your future, but you also end up saving tax on your income through pension contributions.
Creating savings through pension contributions
Today’s lifestyle is extremely expensive, and you will not end up saving a lot if you get all your earnings in hand. So the best way to deal with your savings is to accumulate it in a fund. This will help you to save a part of your income. When you get money in hand, most of the time you end up spending it even if it is for unnecessary things. Now if you are using the pension contributions scheme, then you can easily save a part of your income for the future. Pension contributions should be made compulsory in all organisations in order to encourage people to save their income.
Thus, pension contributions are a very useful thing. But if you in dire need of money you can always use schemes like pension drawdown in order to take out money from the fund yet keep the investment. This scheme along with the pension contributions is definitely one of the best ways to have savings yet have them in a reachable way. You never know when you might need money in an emergency, so it is best to have some savings that you can pull from. Thus, pension contributions are the best option for all individuals!