It’s nice to get a little bit more, and that is certainly the case when it comes to your retirement. Having more money in your retirement fund means you’ll be able to do more of the things you want when you stop working.
The great news is, by making some minor adjustments here and there, you can boost your pension pot so that it gives you a comfortable retirement rather than just getting by. Therefore, continue reading to discover eight top pension-boosting tips.
8 Top Pension Boosting Tips
1. Remain within a workplace pension.
Employees earning at least £10,000 annually and over the age of 22 should be enrolled in the workplace pension. Around 8% of your salary goes towards your pension fund.
This amount consists of personal contributions, employer contributions, and tax relief. Therefore, you are not paying for the entire fund yourself.
Opting out of a workplace pension means you could be losing out on thousands of pounds every year. Doing so will likely leave you financially worse off during your retirement. It is critical to plan for your long-term future; when evaluating your pension, seek experienced assistance from a specialist such as Portafina.
Remember, the 8% that goes towards your retirement fund is a minimum. Both you and your employer can choose to make additional payments into your pension pot. These additional or top-up payments can boost your pension considerably.
2. Regularly check how your pension is doing.
Making regular pension contributions is excellent. However, you should not merely make these payments and expect your pension to perform as it should do.
If you pay higher pension charges, or your pension is not performing as expected, your pension could suffer. Failing to regularly check how your pension is doing means you’ll be unaware of either of the circumstances.
Incredibly, over 70% of defined contribution pension holders do not know what they pay in charges for their schemes. This number of people seems staggering, particularly considering the effect of reducing chargers just a little.
If you were to reduce your annual pension charges by 1%, you could accumulate an additional £27,000 over the lifetime of your pension scheme. Similarly, increasing its performance by 2% annually could give you an additional £54,000 for retirement.
Consulting with a regulated professional financial advisor can help you check on your pension and decide what action to take to maximise its performance.
3. Understand your State Pension income.
The State Pension is unlikely to provide you with a comfortable income level for your retirement on its own. However, it does act as an excellent supplement to your other retirement income. Therefore, you should understand what you are likely to receive when you reach State Pension age.
To receive the full state pension, you must have made National Insurance (N.I.) contributions for 35 years. Although these years do not need to be consecutive, any gaps you have will reduce the State Pension you’re entitled to receive.
4. Relocate any lost or misplaced pensions.
You could well have more significant retirement funds than you think. For instance, if you’ve had several different employers during your career, you could well have as many workplace pension schemes.
Even though you have not contributed to these games for some time, they still could have a considerable amount of money in them. This money is rightfully yours, so you should endeavour to relocate it.
If you delay relocating old or misplaced pensions, they could suffer from underperformance, high charges, or both, as we alluded to above. Therefore, get started right away on relocating them before they lose any more value.
5. Claim your full tax relief.
A significant benefit of pension savings is that contributions qualify for tax relief. As a basic rate taxpayer, your tax relief is claimed automatically by your pension provider or employer. For higher rate taxpayers, you need to claim your tax from HMRC directly through your self-assessment submission.
The money you receive from tax relief is a benefit you would not typically receive. Therefore, you should ensure you are receiving your maximum amount of tax relief, so you can boost your retirement funds.
6. Make top-up payments whenever possible.
Whether you are saving into a workplace pension or a personal pension plan, it’s a good idea to make top-up payments whenever possible. Even making small top-up payments can give your pension a considerable boost. For instance, an additional £50 a month going into your pension pot to produce an extra £23,000 in retirement.
7. Carry forward your unused annual allowance.
The amount of money you are able to pay into your pension each year without paying tax is known as your annual allowance. Currently, the limit is £40,000, or the value of your salary, whichever is the least.
This allowance includes both your contributions and those of your employer. If you put more than your annual allowance into your pension pot, you could incur tax charges. To avoid these, you can carry-forward any unused allowance.
You are able to carry forward up to 3 years of unused allowances; however, you must have used all of your current annual aunts first before carrying any amount forward.
8. Get professional financial advice.
Those who seek advice from a regulated professional financial advisor, on average, have around £27,000 more in their pension pots than those who forego such advice.
Pensions can appear complicated, and they’re not one of the most exciting things to deal with either. Therefore, you should consider putting your retirement into the hands of a professional and getting some regulated financial advice.