It’s always nice to have a little bit more of everything; a bit more time, a bit more fun, and of course, a bit more money. The same principle applies to retirement funds. Having a little more in your pension pot could make the difference between nearly getting by and having a comfortable retirement. As always, taking financial advice from a regulated advisor such as Portafina is highly recommended. The good news is that by making just a few tweaks, you can maximize the funds you have to retire.
Therefore, read on to discover eight tips to boost your retirement funds.
8 tips to boost your retirement funds
- Do not opt-out of your workplace pension scheme.
Being twenty-two or over and earning more than £10,000 per year means you will automatically enrol in a workplace pension scheme. Your contributions to the scheme tax relief and contributions by your employer mean that you will receive approximately 8% of your gross salary into your pension scheme.
However, if you opt out of your scheme, it could cost you thousands of pounds each year. More importantly, opting out could leave you short of retirement funds when you stop working. Remember your employer is obliged to pay 3% of your gross salary into your pension scheme. However, they may contribute more than this amount. Opting out means you’re effectively refusing free money from your employer.
- Conduct regular pension reviews.
If you’re already contributing to a pension, well done. However, making payments into a pension scheme is not enough. You need to ensure you’re conducting regular pension reviews to ensure your funds are on track to provide what you need in retirement.
The reality is that high pension charges could be ruining the performance of your pension. Failing to conduct regular pension reviews means that you may not be aware of the charges you are paying. Unfortunately, this is the case for most pension holders, with around 71% failing to understand what they are paying in pension charges.
Reviewing your pension regularly can have significant financial advantages. For instance, if you reduce your pensions charges by just 1%, you could generate an additional £27,000 into your pension pot over its lifetime. Also, if you were to improve the performance of your pension by 2% annually, you could end up with £54,000 extra to use in your retirement.
You can use the services of a regulated financial advisor to help you with this. They will go through your pension schemes and assess them, then recommend if you would be financially better off switching to another scheme.
- Check your state pension entitlement.
Although the State Pension is probably not enough to provide everything you need in retirement, it will give a good foundation. Therefore you should check what level of state pension you will receive when you retire. You need to have made 35 years worth of National Insurance contributions to receive the full state pension. These contributions do not have to be made consecutively. However, if you have any gaps in your contributions, this will affect the level of state pension you are entitled to.
- Track down lost pensions.
You may already have more retirement savings than you are aware of. If you’ve changed employers throughout your working life, you might have several workplace pensions. If you have lost track of these schemes, you could have some that you are unaware of.
Even though you no longer contribute to these pensions doesn’t mean the money is not yours. Therefore, you should start tracking them down as soon as possible. Delaying your search means that your pension fund could suffer from high charges or poor performance, which will erode your money over time.
- Claim your maximum tax relief.
One of the most significant benefits of paying into a pension is that your contributions are subject to tax relief. If you pay tax at the basic rate, your employer or pension provider will automatically claim your tax from the government. You may need to reclaim your tax directly from HMRC through the self-assessment process if you are a higher rate taxpayer.
Tax relief basically amounts to free money. Therefore it is worthwhile taking the time to check that you were receiving your maximum entitlement of tax relief. Doing so will boost your savings for retirement.
- Make overpayments into your pension
Whenever possible, you should make overpayments into your pension fund. The good news is your overpayments do not have to be huge to make a difference. Paying just £50 extra a month over the lifetime of your pension could leave you with an additional £23,000 of savings for when you retire. Of course, you should not overstretch yourself and only make overpayments to an amount you are comfortable with.
- Carry forward your annual allowance
Your annual allowance is the maximum amount you can pay into your pension each year. Currently, your annual allowance is set at £40,000, and this amount includes contributions made by the employer and yourself. Exceeding this limit means that you could be liable for additional tax charges.
However, you have the option of carrying forward any unused element of your annual allowance. Doing so can help you avoid paying any additional tax. You can carry forward unused annual allowance from 3 years previously. However, you can only carry it forward once you have used up your current allotment.
- Get some regulated financial advice.
Seeking advice from a regulated financial advisor could put an extra £27,000 into your pension pot. Pensions are not exactly the easiest thing to get your head around, nor are they enjoyable to deal with. Therefore, getting assistance from a financial professional will help you maximize your savings to provide for your retirement.
Conclusion
It’s always nice to have a little more, which certainly goes for your pension funds. Hopefully, these eight tips to boost your retirement funds will help you increase your savings and provide you with a more comfortable retirement.
