It’s always nice to have a little bit more money, and this is undoubtedly the case when considering retirement savings. When it comes to money you have in your retirement fund, having that bit extra can be the difference between a comfortable lifestyle and just getting by.
You can increase the size of your retirement fund by following these eight top tips to make the most of your money.
1. Stay Opted Into Your Workplace Pension
If you are enrolled in a workplace pension, do not be tempted to opt-out. Employers are now obliged to provide a workplace pension scheme for their employees. To qualify, you need to be employed, earning at least £10,000 per annum, and be at least twenty-two years old.
Your workplace pension contributions are made up of a personal contribution of 5% of your gross salary, together with a further 3% paid by your employer. Both you and your employer can make additional contributions on top of these mandatory payments.
If you opt-out of the scheme, you will miss out on thousands of pounds worth of contributions. Missing out on this opportunity could jeopardize your standard of living during retirement.
2. Regularly Check and Review Your Pension
Merely making regular payments into a pension scheme is not enough to ensure a comfortable retirement. If you don’t keep a regular check on your pension, it can suffer from poor performance and rising charges. Both these will eat into your pension’s growth, potentially leaving you short when it comes to your retirement. Regularly reviewing your pension will allow you to check any negative aspects and correct them accordingly.
It seems unbelievable, but over 70 per cent of people with defined-contribution pension schemes are unaware of what they’re paying in charges. If you can reduce your annual charges by only 1 per cent, you could get a large additional amount in your pension pot. Similarly, switching to a better-performing fund yielding an additional 2 per cent annual growth could boost your fund.
Knowing where to find the best performing pensions with the littlest charges is the challenge. Seeking advice on this matter from a regulated financial adviser is likely to be your best course of action.
3. Check You’ll Receive the Full State Pension
The State Pension on its own is unlikely to let you sustain the lifestyle you desire in your retirement. However, it is nice to have, and even better if you are entitled to the full amount.
To qualify for a full State Pension, you need to have paid 35 years’ worth of National Insurance contributions. Although the years do not need to be consecutive, the number of years below thirty-five are known as gaps, affecting how much pension you receive.
4. Track Down Any Missing Pensions
If you’ve had several employers throughout your working life, the chances are that you have several workplace pension pots. Regardless of having ceased to contribute to them, these pots belong to you.
Without checking these pension pots, they could be losing money through high charges, poor performance, or both. Track them down, and do something with them. A regulated financial advisor can help you with this matter.
5. Maximise Your Tax Relief
One of the most significant benefits of a pension scheme is that it comes with tax relief. If you are a basic-rate income taxpayer, then tax on your contributions is reclaimed from the government by your employer or your pension provider, depending on the scheme in which you’re enrolled.
For taxpayers at the higher or additional rates, you will need to reclaim your tax from the HMRC through a self-assessment tax return. In either case, tax relief effectively provides you with free money, so you should maximise it to boost your retirement fund.
6. Make Regular Additional Payments
If you contribute to a workplace pension or a private scheme, either way, it is advisable to make regular additional payments to give your retirement fund a boost. Making top-up payments, either regularly with small amounts or with a more considerable lump sum, could make a huge difference. Even contributing an additional £50 each month could boost your pension fund.
7. Carry Forward Your Annual Allowance
The current annual maximum limit for paying into your pension is set at £40,000, and this includes combined contributions from yourself and your employer. Any contributions over your annual allowance limit could be liable to taxation.
To limit such charges or eliminate them completely, you can carry forward any unused annual allowance. However, carrying forward is limited to the previous three years and can only be done if the current year’s allowance has been used.
8. Get Some Regulated Financial Advice
Getting regulated financial advice is a smart thing to do, and those who have done so could benefit from on average over £30,000 more in their pension pots, according to a report by the ILC-UK. It may not be the most exciting thing to discuss, but your pension is critical to a comfortable retirement. Talk to a regulated financial advisor to get your retirement funds maximised.
If you are considering your pension, consider using a regulated pensions specialist like Portafina or, view the guides at The Pensions Advisory Service.
