When retirement comes around, we all want enough money to have fun, be comfortable, and be able to do the things we want. For most people, having sufficient funds to do this means building up your pension pot.
Making a few simple tweaks to your pension plan can increase its size, and these tweaks are relatively straightforward to achieve. Here are eight tips to maximise your retirement funds.
1. Workplace Pension – Think Carefully Before Opting Out
For people aged over twenty-two years and earning over £10,000, you’ll be enrolled automatically into a workplace pension scheme. Employer contributions, tax relief, and the amount added personally mean that your pension receives around 8% of your annual salary.
If you decide to opt-out of your workplace pension, you could be losing out on thousands of pounds. This loss could mean you’re in a worse financial situation when you retire. Also, remember that although there is a minimum amount that you and your employer need to put into your workplace pension, you can put more into it. Increasing your pension contributions will boost your pension considerably. 2. Pay Extra Into Your Pension
Whenever possible, consider paying extra into your workplace or personal pension scheme. This extra cash input will boost your pension fund. You can increase your fund by making small regular payments or a one-off payment if you come into a large sum of money.
3. Conduct Regular Pension Reviews
Making regular pension contributions is excellent. However, it is not sufficient to only make pension payments. You need to be making regular pension checks. The reason being that an underperforming pension and high charges could be eating into your retirement funds.
Moreover, if you conduct regular reviews on your pension, you’ll discover early that your pension is starting to erode, and you can take action to rectify things. To help you with these pension reviews, you could engage the services of a regulated financial adviser. They’ll be able to help you ensure your pension remains in good shape and when you might need to move your funds to another scheme.
4. Locate Any Missing Pension Pots
If you’ve been an employee for all your working life, you may have changed jobs several times and so have multiple workplace pensions. You may have ceased paying into them, but the money in those pensions remains yours. It is possible that those pensions may not be performing as expected and could be losing value. So, locate them and conduct a review as soon as possible.
5. Claim Your Maximum Tax Relief
One of the most significant advantages of a pension is tax relief. If you are a basic-rate taxpayer, you can reclaim income tax on the element of your salary paid into your pension through your employer’s PAYE scheme. Higher-rate taxpayers must reclaim this tax themselves through a self-assessment tax return. Failing to reclaim your tax is effectively refusing free government money, so ensure you do it.
6. Check Your State Pension Contributions
The State Pension might not be enough to sustain you through your retirement on its own. However, you should still aim to receive the maximum from it. To maximise your State Pension payments, you need to have paid National Insurance contributions for thirty-five years. These contributions don’t have to be made over consecutive years, but it will affect the amount of pension you receive if you’ve missed any years.
7. Carry Forward Your Annual Allowance
Everyone has an annual pension allowance. This amount currently sits at £40,000, and it includes the contributions from your employer. Exceeding this figure means you might be liable for a tax charge. To avoid these charges, you can carry forward the unused balance of your annual pension allowance from the previous three years. To carry forward the balance of earlier years, you need to have used up your current pension yearly allowance.
8. Seek Advice From a Regulated Financial Advisor
According to the ILC UK research, people who get regulated professional financial advice are likely to have on average around £31,000 more in their pension funds than those who seek no advice. Pensions are complicated financial tools, so you must speak with someone that knows them inside-out and can give you impartial advice.
Conclusion
Maximising your pension is essential to enjoy the life you want when you stop working. Hopefully, following these eight tips will help you achieve a comfortable, fun, and happy retirement. If you’re thinking about your pension, speak to a regulated adviser like Portafina or, view the guides at The Pensions Advisory Service.
