‘Literally free money’: Vital pension insight from finance expert who was financially free

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Pension contributions amount to “free money” for Britons, according to Ken Okoroafor. He is a financial consultant who runs his hugely successful platform The Humble Penny.

Ken started the platform with the aim to help create “financial joy”.

Ken achieved financial independence aged just 34 and now aims to help others do the same.

He urged Britons to make the biggest pension contribution they can with their employer to make the most of matching contributions.

Employers are obliged to match contributions into pensions up to a certain amount.

Ken said: “Get matching contributions. Get as much matching as possible.

“It’s literally, free money, so get as much as possible to fill your pension, as much as you can if your goal is to remain in full-time employment.

“Do that and then, once you’ve maxed that out, you still have the opportunity to invest more.”

After maxing out pensions contributions with employers, Britons should put money into their ISA, Ken said.

“Then focus on getting some money into your ISA,” he said.

“Your ISA is absolutely important and you only get £20,000 in there. Get as much as you can into that and try to repeat that every year.”

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An ISA is important because it allows Britons to save tax-free up to £20,000.

“Then you can explore taking up a general investment account and try and use up your capital gains allowances, which everyone as every year, as another way.

“This is not a tax-free environment but what it does is it gives you that ability to use your personal allowance for capital gains perspective.”

The capital gains allowance is paid on gains above your tax-free allowance.

The Capital Gains tax-free allowance is £12,300 for individuals and £6,150 for trusts.

Ken also recently discussed salary sacrifice schemes to boost the retirement pot. 

Ken told Express.co.uk: “A key thing that people might want to consider doing is to do more salary sacrifice into their pensions.”

This is an agreement between you and your employer to reduce your earnings by an equal amount made to your pension contributions. Then your employer agrees to pay the total pension contributions.

Ken said: “You might end up with less take-home pay but, in actual fact, it means the sacrifice will lessen the national insurance tax you pay.”

Salary sacrifice will not cost an employer any more.

Ken went on: “The Government has actually written a guide as to what employers can do to set up a salary sacrifice scheme. What’s really important and really cool is if employers actually looked, they notice their national insurance actually decreases.

“The employer is never worse off, they just need to go through the administrative process to set these things up.”

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