Why have a pension?
Contributions to pensions schemes attract tax relief. For a private individual this means tax relief at the highest rate of tax they fall under at the time. For a high rate taxpayer, an investment of £1,000 will only require a net outlay of £600. That’s an immediate return of 66.6%. For a basic rate taxpayer, an investment of £80 per month means £100 going into the pension fund, an immediate return of 25%. The investment fund itself also has certain tax advantages, which means that the growth of the fund might be greater than the equivalent in another type of investment fund.
As pension contributions enjoy tax benefits, the government limits how much you can put in at a time.
