It’s always nice to have a bit more of things, which certainly applies to your retirement income. Maximising the money you have available for when you retire can be the difference between enjoying a comfortable lifestyle and merely getting by.
Many people rely on a personal or workplace pension to provide for their retirement income. Therefore, let’s look at eight ways to boost your pension funds.
Don’t opt out of a workplace pension.
Workplace pensions provide millions of employees with an automatic and hassle-free means of saving for retirement.
If you qualify, your employer should enrol you into the scheme as soon as you start working for their company. Your contributions are taken from your monthly gross salary, which equates to around 4% of your pay. These are supplemented by a further 3% from your employer and an additional 1% from tax relief on your contributions.
When you opt out of a workplace pension scheme, you neither receive tax relief nor your employer’s contributions. The result would be you losing thousands of pounds each year that would’ve gone to your retirement funds. Therefore, opting out of a workplace pension scheme should be a last resort and only considered in dire financial circumstances.
Regularly review your pension’s performance.
Paying into a pension scheme is an excellent start to your retirement preparations. However, making contributions and expecting your pension to perform as you would like is insufficient.
Indeed, doing so will likely result in your pension funds eroding through poor performance and high charges. Regularly checking your pension will inform you how it is performing and allow you to take corrective action if required.
If you do this, you will be in the minority. Surprisingly, over 70% of defined contribution pension holders are unaware of how much they pay in management charges.
These people cannot be aware that even a tiny adjustment can significantly affect the pension pot. For instance, reducing the management charges by a single per cent annually could give you £27,000 more towards your retirement. Similarly, a one per cent increase in performance could boost your pot by the same amount.
If you feel you need some assistance with this aspect of your pension planning, you should consult with a regulated financial advisor. Check out Portafina.
Check your State Pension entitlement.
Let’s be honest, the State Pension will not be sufficient to give you the lifestyle you want for your retirement. However, it is an excellent supplement to your other retirement income sources. Therefore, you should wish to receive as much of this benefit as possible.
Making National Insurance contributions for 35 years qualifies you to receive the full State Pension. Although these years do not need to be consecutive, you will need to fill any gaps or accept a reduced pension payment.
Locate old pension plans.
Frequently changing employers throughout your working life means you may have as many workplace pensions as you’ve had jobs. Although you may have been aware of the pension scheme you were contributing to while in a particular workplace, it is easy to lose track of these once you move on.
Consequently, you may have existing pension funds of which you are unaware. The money in these parts is rightfully yours, and you should endeavour to locate it as soon as possible. Remember, as we mentioned above, underperformance and fees could erode your pension funds.
Claim as much tax relief as possible.
One of the most significant benefits of saving into a pension plan is receiving tax relief on your contributions. Basic rate taxpayers have their taxes tax reclaimed automatically by their employers or pension providers.
However, if you pay a higher rate, you will need to reclaim your tax directly from HMRC. Either way, you should ensure you are reclaiming as much in tax relief as you are entitled to. Better the money goes towards your retirement fund than going to the government.
Make top-up payments whenever possible.
You have a finite amount of time to grow your retirement fund. One way to accelerate its growth is to make regular top-up payments to your pension whenever possible.
Top-up payments do not have to be considerable sums, although you may want to consider this if you come into some money. Indeed, regularly making small top-up contributions can have a significant beneficial effect on your pension size. For instance, making additional payments of just £100 per month could boost your pension by £46,000 over its lifetime.
Carry forward your annual allowance.
The amount you can contribute to your pension pot each year is your annual allowance. This figure is currently £40,000, which includes your employer’s contributions and yours.
Exceeding your annual allowance could leave you liable for tax charges. To avoid these, you can carry forward unused annual allowance from up to three years previously. However, before carrying any forward, you must have used up your entire annual allowance for the current year.
Speak with a regulated financial advisor.
Speaking with a regulated financial advisor could be the most fruitful conversation you ever have. Historically, people who seek such advice end up with around £27,000 more in their pension than those who do not.
The bigger your retirement fund, the more you can do, and the more comfortable your post-working years will be. Hopefully, you now have eight ways to boost your pension funds, to give you the retirement lifestyle you desire and deserve.