8 top tips for increasing retirement savings
Have you re-visited your pension recently? Hopefully it’s on track to provide you with a fantastic retirement, but you may find that it’s not quite as good as you were expecting. The good news is that nothing is set in stone. A tweak here and a tweak there can make a real difference to the size of your pension. Take a look at our 8 top tips for increasing your retirement savings…
Think twice before you opt out of your employer’s pension
If you do decide to opt out of your company pension you could be missing out on free retirement savings. One of the most attractive things about a workplace pension is your employer will also contribute to your savings as well. It is likely you (and your employer) will start by paying the minimum contribution amount. When you increase your payment, your employer may also offer to increase their payment too, also known as “contribution matching”.
Cut your pension fees by consolidation or transfer
Always keep a close eye on the fees you are charged for the administration of your pension. These fees may go up and down a lot over time significantly impacting your pension pot when you eventually retire. If you have many pension pots, there will probably be a fee on each one. An adviser can check out other pensions on the market with lower fees and recommend if switching your pension could improve your situation and potentially boost savings in the future.
Check out your state pension
The state pension is going to underpin your total retirement savings so you need to know whether you are going to get the full rate or not. Check the rate you are going to receive in the government website. If below £159.55 per week, then you must have had a gap year(s) – or in other words, you have not paid the full amount of NI contributions.
You can make class 3 voluntary NI contributions to bring it back up to full state pension. (1 gap year, will cost £741) This may seem a hefty amount of money, but it can prove to be a great investment as it will provide an increased income for the rest of your life in retirement. You can check you state pension by filling in form BR19 which is available on the government website
Track down past pension funds
If you have had multiple jobs in your career, then you may have many workplace pension schemes. Even though you are not contributing to them now, the savings you made before you left the job are rightfully yours. The sooner you track them down, the sooner you can manage how to maximise their growth. To get you started you can trace lost pensions on the government website; alternatively we can help you find your pensions and review their performance.
Ensure you are claiming the full tax relief you are allowed
One of the huge benefits of a pension is tax relief. For basic rate tax-payers, tax relief can be claimed back from the government either by your employer or your pension provider, depending on the terms of your scheme. If you are a higher or additional rate tax payer, you may need to claim the extra 20% or 25% tax relief back from HMRC yourself, through self-assessment. This is essentially free money, so it’s worth making sure you are receiving your full tax relief to help boost your retirement savings. Any tax treatment discussed is very much dependant on your personal circumstances and could be subject to change, so it’s worth checking where you stand with the HMRC.
Increase your contributions!
It may sound obvious, but pensions can easily get forgotten while ticking away in the background. Frequently review your pension payments in terms of your own budget so that contributions are increased when you can afford to do so. The longer time you have to contribute, all the better too. Remember you can defer when you take your state pension and money purchase pension (you can also with some final salary pensions – check with your employer). If your budget and circumstances allow, those added few years could make a real difference to the size of your final pot.
Carry your annual allowance over
The maximum that you can pay into your pension each tax year is called your ‘pension annual allowance’ and is currently set at £40,000. This amount includes your own and your employer’s total contributions - anything over this may incur a tax charge. Tax relief is available on your contributions that equal up to 100% of your earnings and is capped at your pension allowance of £40,000. If you don’t use all your allowance in one year, you can carry over the remaining balance and use this to boost your annual allowance limit the following year. You can only carry forward unused allowance from the previous three years.
Seek regulated financial advice
It is easy to go stumbling into the first pension opportunity which comes your way. Seek regulated financial advice to make sure the scheme meets your unique goals and needs.
“The Value of financial Advice” a report sponsored by Royal London which tracked how people’s investments have grown since 2001, found that on average people who took financial advice were better off than those who did not take advice. Especially in terms of pensions1. The survey was split into two groups: the “affluent group” were found to have accrued £30,882 on average more in pension wealth; the “just getting by group” accrued over £25,000 on average more in pension wealth over the period of the survey.
Looking to get the best out of your pension? Portafina are pension specialists regulated by the Financial Conduct Authority (FCA). We offer advice with no obligation. We will place your needs and goals at the heart of our assessment so you can see clearly the options open to you and look at ways to possibly boost your savings in retirement.
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The details provided in this article are for general information only and are in no way deemed to be financial advice. All of the material is correct as of the publication date, but could be out-of-date by the time you read the article. For our latest information and news, please see our articles section: https://www.portafina.co.uk/whats-new
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