Top Tips To Help You Increase Your Pension
Too many people in the UK don’t have a Pension Pot that will allow them to make the retirement choices they want or to live the lifestyle they had aspired to for their later years. However, there is a broad range of options to increase your Pension Pot, and in this article, we share some of the most popular ones.
Contribute More As Soon As Possible
One of the most effective ways to boost your Pension Pot is to increase your Pension contributions.
It sounds simplistic, but some of the best Pension savings are those made over a long period of time, allowing your retirement savings to grow and continue to benefit from exponential growth as they earn additional annual growth on the benefits gained the year before.
As a minimum, you should be aiming to save 10% of your salary throughout your working career to achieve the Pension savings and retirement income you’ll need to have a successful retirement plan.
There are some fantastic tax relief allowances on the contributions you make to your Pension Plan. For many people, this includes tax relief at 100% per annum on contributions up to £40,000 a year.
You won’t usually pay tax if your Pension Pots are worth less than the lifetime allowance. This is currently £1,073,100. (Correct as of August 2023).
Employer Pension Contributions
Speak to your employer to see how they can help you to boost your Pension contributions through their workplace pension scheme. Many will match the contributions you make, while others are happy to make a percentage contribution to your Pension Pot based on the percentage of your salary you have elected to save. This is free additional Pension contributions to boost your Pension Pot, and you don’t have to pay it back to them if you leave that job!
Your employer will benefit too, as their contributions provide their business with tax relief allowances against Pension contributions they make for their employees.
In October 2012, all UK employers had to start enrolling their existing staff into a Workplace Pension scheme, and by February 2018, all new employees had to be automatically enrolled into a Workplace Pension Scheme. Employers had to make a conscious decision to opt-out of a scheme. This is called ‘automatic enrolment’.
Your employer must automatically enrol you into a pension scheme and make contributions to your pension if all of the following apply:
- You are classed as a ‘worker’ (this primarily involves you having a contract with your employer)
- You are aged between 22 & The State Pension Age for your age group
- You earn at least £10,000 per year
- You usually work in the UK
A full breakdown of the criteria can be found on the Government website
The State Pension
With the full New State Pension standing at a maximum of £203.85 per week (Correct as of August 2023), the State Pension is better thought of as a top-up to your personal Pension plan rather than you being reliant on it as your only source of retirement income.
You must ensure that you are fully up to date with all your National Insurance Contributions to be able to claim the maximum basic State Pension.
The State Pension cannot be drawn until you reach the State Pension Age and if you have made your full National Insurance Contributions. In the last few decades, successive Governments have increased the State Pension Age as the average life expectancy of UK adults has been increasing. It is currently under review again, so we should always expect further rises in the State Pension Age in the future.
Your own State Pension Age will be determined by your date of birth, and the UK Government t website has a handy State Pension Age calculator if you are unsure of your own retirement date.
It is always worth getting a State Pension Forecast to understand:
- How much State Pension you could get
- When you can get it
- How to increase it, if you can
You can obtain a copy of your State Pension Forecast from the State Pension pages of the UK Government website.
Utilising Other Assets
Your own personal pension is just one element of your overall retirement plan. Many people will have other assets they can use to achieve their retirement income and retirement goals.
For example, they may foreign or buy-to-let properties that could be sold or that are delivering an income from which they can save Pension contributions. They may have a business or a share in one that could be sold. Perhaps there is a valuable asset or collection that could be sold to generate revenue for your Pension Pot.
You may be thinking about downsizing your home in your retirement and releasing cash for your Pension Pot through that process. You may want to stay in your home, in which case there are equity release plans that may be able to help you free up the locked-in value of your property so that you can access your Pension income that way.
Create a Pro-active Retirement Pension Plan
Once you are clear on the opportunities available to you to derive a retirement income, the next step is to create a Pension Plan. This involves you considering at what age you want to be able to retire, the lifestyle you expect to have, and the retirement income you will need to fulfil those desires.
Once you know the answer to these questions, then a Redwood Financial Adviser can help you to work out how you can best create the Pension savings you need from the options you have available to generate your ideal Pension ‘number’.
If there is a shortfall between your projected Pension Pot value and the ‘number’ that you need to have the retirement you dreamt of, then a Redwood Financial Adviser can work with you to create a Pension Plan to bridge the gap.
Start Your Pension Plan As Early As Possible
The one thing we do know after years of experience working with Clients on their Pension Plans is that the longer you leave it, the harder and more stressful it becomes to achieve the Pension Plan of your dreams.
This is not a subject any of us can afford to bury our heads in the sand over and hope it will all come out OK in the end. It rarely does!!
Do I need a Pension Adviser?
You may need help from a Financial Adviser to assist you with your decisions about your financial planning. Redwood’s Advisers are authorised to give you advice and recommend suitable Pension products and investment options for you.
If you want to take your Pension as a lump sum or as a flexible retirement income, you are required to obtain financial advice from an Adviser if your Pension pot is over £30,000 and it contains a promised amount or rate of income, such as a guaranteed annuity rate or defined benefits (e.g. a Final Salary pension).
In some instances, Pension providers may require you to obtain financial advice if you decide to choose a certain retirement option. For example, if you choose to take a flexible retirement income, a Pension provider may ask that a financial adviser helps you decide which investment choices are right for your retirement planning.
The great news is that Redwood is a Chartered Financial Planning business, a widely accepted ‘gold standard’ qualification for professional Financial Planners and Financial Advisers in the United Kingdom.
By definition, holders of the Chartered Financial Planner qualifications are among the most experienced and most qualified Advisers in the profession.
A Great Pension takes Great Planning.
“A goal without a plan is just a wish.” (Antoine de Saint-Exupery, French Author & Philosopher).
If you don’t have by Pension right now, take action!
If you have one but would like to understand what it is worth and how to make it even better, take action now!
A great place to start our FREE Pension Planning Webinar: Roadmap to Retirement.
In this FREE Pension Planning Webinar, you will learn:
- The amazing benefits of starting to save for your Pension in early life
- How to calculate what you need to save to achieve your retirement dreams
- The importance of diversifying your Investment Portfolio to maximise your Pension Fund
- The 3 Key Steps to creating and achieving your Retirement Plan
- The alternative ways to achieve Retirement without a Pension
- How to balance risk versus reward when setting your Pension Strategy
For more information about our Pension Advisory Service, visit our website.