New year 2022: a time to look long-term?

The beginning of a new year is traditionally a time for new year’s resolutions. And, as we venture cautiously into 2022, many of us will be setting goals around enhancing our finances.

We left 2021 expecting to have to tighten our belts as far as money is concerned – a likelihood of rising inflation, low interest rates, and reduced financial flexibility. So how can we plan for our long-term futures, and retirement, when we are simply trying to keep up with everyday needs?

Organise and monitor to save more

When money gets tight in the here and now, we tend to think less about the future. The good news is there are great ways to save for rainy days, for the short-term and for the long-term, without having to contribute more.

If we want to protect our financial futures, it is a good idea to look at how we save for the future rather than sacrifice for the present. This is perhaps why many have looked to their long-term finances for a new year’s resolution and found it can offer new positive habits, peace of mind and most of all a secure and happy retirement.

What are the top five ways to protect and enhance your pension in 2022?

The most important thing we can all do in relation to our pensions is take it seriously. This is often difficult because it may seem very distant. However, the sooner we start preparing for retirement, the greater pension we are likely to have.

1. Monitor your pension

Only too often a lot of hard work goes into starting a pension off and then those funds get kind of forgotten. If you are regularly monitoring your pension, you can respond straight away when you feel it is not thriving. Not all of us are financial wizards so it is highly recommended to chat with one of our regulated financial advisers to look at your options at times like these.

2. Adapt your pension

Starting a new year is a great time to get your finances in order and start some really positive habits to keep safe and secure. And you can keep building on your pension fund without necessarily making greater contributions. Let’s take a look at some of the options open to you:

  • Consider transferring your pension to another pension provider that is thriving better.
  • If you have more than one private pension you can transfer all your savings into one pension pot. It is always recommended to only make moves like this with the guidance of a regulated financial adviser.
  • Keep your retirement date firmly in mind. You will have your official retirement date but after the age of 55 you can decide when you receive your private pensions.
  • Keep an eye on your investments and be ready to get the very best guidance for saving your money in the right places.
  • Review your State Pension. If you have had gaps in your working career (which most of us do) you may not have paid enough National Insurance to receive the maximum State Pension amount. You can top this up by making extra voluntary contributions.

3. Take tax benefits into consideration

Finding a great short-term savings platform such as an ISA is useful because of the tax benefits. There are many different ways to take advantage of tax breaks with your pension as well.

Government contributions

The government will automatically give tax relief for every contribution you make to your pension. This could mean that contributions can be a lot less than you may at first think. For instance, if the government classifies your income as basic rate, then the tax relief will be 20%. So, if you wanted to contribute £10,000 to your pension, you would only need to find £8000. Tax relief would provide the rest.

Employer contributions

Don’t forget if you have an occupational pension, your employer and the government will also make contributions on top of your own. This knowledge gives you more flexibility in the size of the contributions you make each month. And if you can contribute more one month, then your employer does too.

Pension Freedoms

You can also receive tax relief through Pension Freedoms. As you approach retirement it may well be that your pension savings can be an extra resource in difficult times. With the correct guidance to ensure your pot offers effective savings for your post-work years, you can access your money from 551. The first 25% of the money you take from your pension fund will be tax-free.

4. Boost savings in the run up to retirement

The good news is you could be sitting on a lot more than you realise. If you have been careful throughout your working years, then you will have been contributing towards a private pension. So, what happens when you change your employer? In the 21st century, the majority of working individuals are likely to work for more than one employer and have more than one pension provider.

You may have stopped contributing to these older funds but all that money you have already saved is available for your retirement. It’s just a case of tracking it down. There are websites set up specially to track down old pensions, so this is a good place to start. You will probably need some idea of either the name of your past employer (if it was an occupational pension) or the pension provider contact details.

5. Are your investments high risk?

The younger you are the more likely you are to have high risk investments. As you get older, it is a good idea to revisit your risk settings with your fund manager. This does not necessarily mean returns on your investments will be lower, it just means you will have a clearer idea of what the returns will be as you approach retirement.

A final word on Pension Freedoms

If you are over 55, Pension Freedoms can assist you in dealing with the here and now and in preparing for your retirement. You can access your 25% tax-free lump sum from your pension to help with debts or for a well-earned treat. When considering this option, it is a good idea to speak with one of our regulated financial advisers to ensure your retirement fund is not affected.

1Accessing your pension early isn’t right for everyone as it can leave you with less to live on later in life. That’s why it is a good idea to speak to one of our regulated financial advisers first, to make sure you are still leaving yourself in a good position for 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.