It is always nice to have a little more, and that is especially the case when it comes to retirement. Having a bit more cash to spend allows you to do more of the things you want to do when you retire or just have more fun!
The good news is that, with just a couple of minor tweaks here and there, your pension pot could increase significantly. Read on to find out how:
Tip 1: Stay Opted Into Your Workplace Pension
All employees over the age of twenty-two who are earning over £10,000 a year should be in a workplace pension scheme through a process known as auto-enrolment. The money you pay into this pension, supplemented by your employer’s contributions, is worth around 8% of your gross salary. On top of that, you do not pay tax on the gross amount you pay into your pension.
Your employer’s contribution and tax relief mean that you are getting some money you would not typically have – effectively free money! Therefore, opting out of your workplace pension would result in you missing out on thousands of pounds each year. Also, both you and your employer can make top-up payments into your pension, which can significantly boost your pension pot on retirement.
Tip 2: Keep An Eye On How Your Pension Is Performing
You may already be making regular payments into a pension, which is fantastic for your retirement planning. However, merely having a pension is not sufficient; you need to keep a regular check of it to ensure it performs as you anticipated. Rising charges coupled with poor performance can erode your pension’s growth, potentially leaving you short of funds when you retire.
Many pension holders are unaware of what they are paying in charges or have the power to do something about it. If you regularly check your pension, you will know how well it is doing and take corrective action should you need to. If this seems like a daunting task, do not despair. A regulated financial advisor can assist you with checking your pension and making the necessary adjustments if required.
Tip 3: Understand Your State Pension
The State Pension on its own is unlikely to be sufficient to sustain the lifestyle you desire in retirement. However, it is an excellent supplement to your other retirement funds, so it is worthwhile to understand what you will receive. If you have made National Insurance contributions for 35 years, you are entitled to receive the full State Pension, currently £179.60. If you have any gaps in your contributions through illness or periods of unemployment, you may be able to make these up. Therefore, understand the State Pension and how much you will likely receive on retirement.
Tip 4: Relocate Any Lost or Misplaced Pensions
You may have several workplace pensions. If you have had more than one job throughout your working life, you will probably have as many pensions as you have had employers. The fact that you’re no longer contributing to those pensions means nothing; the money in them is rightfully yours, and you can do something with it.
If the pension is not performing well, you can transfer it to another scheme. Or, if you have several smaller workplace pensions, you might choose to combine them to make things easier to track. Regardless of what you want to do, you can’t do anything if you don’t have access to your pensions. Therefore, make an effort to track them down.
Tip 5: Claim All The Tax Relief You Are Entitled
A significant benefit of saving into a pension is that your contributions will qualify for tax relief. Basic rate taxpayers don’t have to do anything to reclaim their tax as this is done for them by your pension provider or employer. If you pay tax at a higher or additional rate, you will need to claim it directly from HMRC via self-assessment. Failing to claim this tax-free money is equivalent to refusing free cash, so ensure yours is reclaimed.
Tip 6: Make Top-Up Payments When Possible
It doesn’t matter if you are paying into a personal pension or a workplace scheme; you should try to make top-up payments as early and as frequently as possible. The reason is that your pension fund will benefit from compound interest over the years. Therefore, the longer your funds are in your pension, and the more you have in there, the more compound growth they can achieve. Saving an extra £50 each month can have a massive difference to the value of your pension pot when you come to retire.
Tip 7: Carry Over Your Annual Allowance
The maximum amount you can pay into your pension each year, including the employer’s contributions, without paying tax is £40,000. This amount is known as your ‘pension annual allowance,’ and you are allowed to carry forward any unused amount from the previous three years. However, you cannot carry any unused allowance forward until you have used up all from the current year.
Tip 8: Consult With A Regulated Financial Advisor
People who use a regulated financial advisor to help plan their retirements have, on average, £30,000 more in their pension pots than those who seek no advice. Many people find pensions dull and complicated, so speaking with a professional can help you avoid making mistakes in your retirement planning.
If you want to have some more money to retire on, you are not alone. Hopefully, following these eight top retirement savings tips will help boost your retirement funds and give you the retirement you deserve. Before considering your pension, speak to an FCA Regulated adviser such as Portafina or, view the info at The Money Advice Service.