After a lifetime of work, wouldn’t it be great to do more of the things you enjoy when you retire? You’ll definitely have more time available, so why not fill that time with something you enjoy?
Of course, doing more fun things is likely to cost more money. Therefore, you need to have more in your retirement fund. The good news is you can make a significant difference to your pension pot by making a few minor adjustments here and there.
Read on to discover eight tips to boost your retirement savings.
1. Stay in your workplace pension scheme.
Thanks to auto-enrolment, you could be enrolled in a workplace pension scheme. To qualify, you must be employed, over 22, and on an annual salary of more than £10,000.
Around 8% of your salary’s value goes into your pension fund each year. This amount consists of personal contributions, a contribution from your employer, and government tax relief.
If you opted out, you would not receive any employee contributions, nor would you benefit from tax relief. The result is you could lose out on thousands of pounds each year. Therefore, you should stay within your workplace pension scheme at all costs.
2. Check your pension at regular intervals.
Making regular contributions to your pension is an excellent start to preparing for retirement. However, you should not merely allow your pension to perform on its own. You should conduct checks at regular intervals to ensure it meets your expectations.
If it is underperforming, or you are paying too high management charges, your pension could be eroding without your knowledge. You will notice if your pension is stagnating by regularly checking it, and you can take appropriate action.
Incredibly, over 70% of defined contribution pension holders are unaware of how much they pay in pension charges. This figure is staggering, given that reducing your pension charges by just 1% a year could reap you an additional £27,000 over the lifetime of your plan. Also, an increase in performance of 2% would leave you with an extra £54,000 on which to retire.
If you are unsure of how to go about checking your pension, you can seek advice from a regulated financial advisor, check out Portafina.
3. Fill in any gaps in your State Pension contributions.
It’s unlikely that the state pension alone will provide you with the retirement lifestyle you desire. However, it does serve as a good foundation for your retirement funds. To receive the maximum State Pension, you must’ve paid national insurance contributions for 35 years. These years do not need to be consecutive, but any gaps will mean you receive a reduced pension.
4. Relocate any lost pensions.
You could well have more of a retirement fund than you think. That’s because auto-enrolment into workplace pension schemes means you might have as many pensions as you’ve had different employments.
You may no longer be contributing to these pension schemes, but the money within them remains yours. Therefore, you should endeavour to relocate any plans you had in previous employment and have lost track of. The sooner you relocate these pensions, the better, as they may be underperforming or be subject to high management charges. Both of these could be eroding your pension funds.
5. Claim your maximum tax relief.
One fantastic benefit of pensions is that your contributions are subject to tax relief. If you pay tax at the basic rate, your employer or pension provider reclaims your tax. For people in the higher tax bracket, you will need to reclaim your tax directly from the HMRC through your self-assessment submission.
Your tax relief on pension contributions is money you would not typically receive. Therefore, you should ensure you make the most of this benefit by reclaiming your total amount.
6. Contribute more when possible.
Whether you are saving through a personal pension or a workplace pension scheme, you should try to make additional contributions whenever you can. Even small amounts can make a significant difference over the lifetime of your pension. For instance, contributing an extra £50 a month could leave you £23,000 better off when you come to retire.
7. Carry forward unused annual allowance.
The most you can pay into your pension each year without incurring a tax charge is £40,000, including your employer’s contributions. This amount is known as your annual allowance.
To avoid paying tax on any contributions over your annual alliance allowance, you can carry forward any unused allowance from the previous three years. However, you can only carry forward unused allowance if you have already used all of your allowance for the current year.
8. Get professional advice.
Although receiving professional financial advice usually comes with a cost, it is small compared to the potential benefits. With resources such as fully certified financial planning available, everyone should start thinking about securing their future finances and the importance of this. People who receive professional financial advice often accumulate far more in their retirement funds than those who do not take such advice.
Also, pensions can appear complex and aren’t particularly fun to deal with. Therefore, consulting with someone qualified to help you financially prepare yourself for retirement may make sense.