Increasing your pension savings can set you up for a lifetime of financial security – and with our tips, saving more doesn’t need to be a burden. Whether you’ve just started your pension planning or are looking to retire soon, below are some simple ways to boost your savings.
- Check your State Pension entitlement to help determine if and how much you’re likely to receive when you reach State Pension age – and whether you’ll need to top it up. Remember, the state pension age for women has been steadily rising to age 65, so that it is the same level as a man. From November 2018, the state pension age for women will be 65.
- Apply for National Insurance credits. The new State Pension was introduced on 6 April 2016, for people reaching State Pension age from that date onwards. People with no National Insurance record before 6 April 2016 will need 35 qualifying years to get the full amount of new State Pension when they reach State Pension age and normally need at least 10 qualifying years to get any new State Pension at all.
- Top up your state pension if there was a time when you did not pay enough National Insurance contributions or get enough National Insurance credits to give you a qualifying year, you may find you have a gap on your National Insurance record. This could mean that you won’t have enough years of National Insurance contributions to get the full State Pension. You can top up your record by making Voluntary ‘Class 3’ National Insurance Contributions. These payments help to fill any gaps in your National Insurance record.
- Maximise your employer’s contributions - when you increase your contributions to a workplace pension or private pension some employers will also boost the amount they contribute.
- Check for hidden fees. The new pension freedoms allow you to access your pension pots early. Some providers, however, charge a fee each time money is taken out. The price and extent of these fees vary significantly between providers, so it’s worth shopping around to make sure that you get the maximum amount of retirement savings possible.
- Redirect regular spending into your pension - if you have a regular expense that stops being needed you can redirect that extra money to your pension instead. As an example, once you finish paying off a car loan, you can use those payments towards your pension fund. This is a quick and simple way to give your retirement savings a boost while sticking to your everyday budget.
- Save any income increases if your income rises – for example, due to a pay rise or a new income stream – put all or part of the sum towards increasing your retirement savings. This can be done in a number of ways, including by increasing the sum you contribute to a workplace or personal pension.
- Carry forward tax reliefs. Carry forward is a process that allows you to make use of any unused annual allowance from the past three tax years. The current annual allowance is £40,000, so you might be able to boost your pension by up to £120,000 without incurring tax.
- Monitor your pension regularly. Monitoring your pension regularly will help you keep your savings on track. You can also check in on the performance of your pension fund. Contact your pension provider to find out the best way to keep track of how your pension is tracking.
- Switch investment funds - pension contributions are often paid into investment funds. If you don’t choose a fund, your pension provider will choose a default. Usually, your pension statement will give you the details of which funds that your pension is invested in. If your investment fund has been under-performing, don’t be afraid to switch. Choosing the right fund to invest in could give your retirement income a boost.
- Track down pensions from old employers. The average person will be employed by several different companies during their working life, meaning you may have some pension pots you’ve forgotten about. In the UK alone, £5bn has been lost in unclaimed pensions. But tracking them down couldn’t be simpler – the government-backed Pension Tracing Service can help you find old pensions you’re entitled to claim.
- Check if you qualify for an enhanced annuity. If you plan on buying an annuity with some or all of your pension, and you have a medical condition such as diabetes, high blood pressure or heart disease, you may be eligible for an enhanced annuity which will pay a higher level of income. Enhanced annuities aren’t always offered by annuity providers, so it’s best to shop around if you think you could be eligible for one.
- Get expert help. Consulting an independent financial adviser can help you put a pension savings plan in place and identify new ways to maximise your income.
- Combine your pensions. If you have several pension pots with different providers you may be able to boost your savings by combining them into one pot. This will also help to keep track of your overall retirement sum and whether or not you’re on track towards your targets. Before you switch, you should check that you don’t have any guarantees that you’ll lose by moving your savings to another scheme, and that the charges you pay aren’t higher in the new scheme.
- Defer your state pension - delaying your state pension start date could result in you receiving a higher weekly state pension or even a lump-sum payment. How much you get depends on when you reached state pension age.
- Pensions tax relief is a top up to your pension contributions added by the government. The rate you get depends on the amount of income tax you pay, so you could get 20%, 40% or 45% depending on how much you earn.