BOOST YOUR RETIREMENT SAVINGS
Having more leisure time is no good at all without the resources to enjoy it. Kay Hill looks at some ideas to boost your pension savings.
Money may not buy happiness – but it can buy great holidays, lovely meals, classic cars and even private medical treatment, all of which can add up to a more satisfying retirement. If you haven’t yet given up work, then there is still time to think ahead and take action to help improve your savings.
Consolidate your pensions
If, like almost everybody these days, you have worked for a variety of different companies over your career, then you might have small pension pots scattered around with different providers. Not only does this become confusing and make it harder to work out how much pension you will receive, it also makes it more likely that you will lose track of a pot completely if you move house.
Not only that, but you will be paying administration fees on every separate pension, and older policies may have quite high charges. Take professional advice, of course, but you will usually find that tracking down all your old pensions and consolidating them into a single fund with a single management charge will give you a better return on investment and be much more straightforward to manage.
If you are struggling to find details of old pensions (perhaps the company you worked for has closed down and you don’t know the pension provider) you can use the Government’s free Pension Tracing Service https://www.findpensioncontacts.service.gov.uk/ which searches a database of more than 200,000 workplace and personal pension schemes to try to find the contact details you need, or try The Pensions Advisory Service for more help. www.pensionsadvisoryservice.org.uk
Increasing your personal contributions
One of the biggest benefits about putting money into a pension is the tax status. And while the current generous scheme may be changed in the wake of Covid-19 costs, as it stands at the moment, the contributions that you pay into your pension benefit from tax relief, and the gains your fund makes aren’t subject to tax while they’re invested in your pension pot.
Assuming you are not already drawing a pension this means that if you are a basic rate taxpayer wanting to pay £100 into your pension, you pay £80 and the Government pays in an additional £20. If you are a 40% taxpayer, you pay £80, the Government pays in £20 and you can claim a further £20 back via your tax return, meaning your £100 investment only costs £60. During lockdown, research by pension provider PensionBee found that many people were investing the money they saved by not being able to go out into their pensions.
You should bear in mind that pension funds can be invested in a variety of ways, so if you are close to retirement you should select a lower risk investment type. There are also fairly complex limits and penalties if you invest too much in a year or a lifetime, so it’s very important to take professional advice. Tax relief is far less generous if you have already started drawing your pension, so make the most of this before you retire.
Maximise your employer contributions
If you are employed, it’s worth checking the details of your pension plan as some employers increase the amount they pay into your pensions when you increase your contributions. This is usually up to a certain limit but it can be a welcome boost to your pension pot.
Delay taking your pension
Life expectancy is increasing, so if you are fit and healthy and want to continue working, leaving your pension untouched can bring benefits in the long-term. Choosing to stay in employment or self-employment and paying into your pension for a few more years keeps your money invested, and means it has longer to grow, boosting retirement savings. Different pension schemes have different rules about this, so make sure you fully understand the consequences.
Downsize your property
New research from PensionBee reveals how downsizing in the UK could unlock up to £417,881 of savings ahead of retirement. Romi Savova, CEO at PensionBee comments: “Our research shows the considerable amount of money that could be tied up in your home. Given the stamp duty holiday, there’s arguably been no better time to downsize, especially if you’re approaching retirement and looking to grow your income. The majority of us aren’t saving enough for retirement, and where it might not be possible to make larger pension contributions, property can help bridge the gap, so it’s something that could be worth considering if you want to boost your retirement fund.”
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