Power of Compound Interest

Simple Maths:
Compound interest is simple concept of getting interest on your previous year’s interest and capital. It is the driving factor that creates wealth to rapidly snowball.

Your pension will compound interest over the time it is invested. The more time it is invested, the larger the effects of compound interest.

Here we look at an example:
Tom and Jerry invest into the same pension with returns of 5% per year on the money invested.

• Tom invests £10,000 per year into his pension at the age of 30. At 70 his pension fund is worth approx £1.2million

• Jerry begins investing £10,000 per year into his pension at 40. At 70 his pension fund is worth approx ££700,000

Key Learning: Start early Investing at age 30 compared to 40 created approx £570,000 difference.
This is a fictional example which was created for illustrative purposes only.

Why should this matter?
Compound interest impacts you in the long term: It affects your investment, savings for children/grandchildren, your retirement plan

I don’t have a pension, what should I do?

• Check your state pension: If you have 35 years of national insurance contributions (NICs) you are entitled for the full state pension of £11,502 a year (from 6 Apr 2024)

• Work with us to set up your pension: At the age of 55, (57 from April 2028) you are able access your pension and there is no limit on the amount of time you need to have paid into the pension before you can get an income from it. Plus you get tax relief on the pension contributions as well.

We can help you get the most out of your savings. Contact us

Please note: Pensions is a long term investment. The value of investments can fluctuate. The value of pensions and the income they produce can fall as well as rise. You may get back less than you invested. Tax treatment varies according to individual circumstances and is subject to change.