A comfortable retirement is something everyone should be able to enjoy. However, doing more of the things you want comes at a price. Have you got sufficient savings put away to provide for your retirement? Perhaps not, and now is the time to start preparing. Therefore, here are eight tips to increase your retirement savings and help you have a comfortable retirement. Obtaining competent and regulated financial advice will assist you in planning for retirement; check out Portafina.
- Don’t leave your workplace pension.
Workplace pensions provide millions of people with a means of saving for their retirement. In many cases, it is their only retirement preparation. Therefore, leaving a workplace pension scheme can leave people with no means of supporting themselves in retirement.
The good news is that you should already be enrolled in such a scheme. The qualifying criteria are that you are over 22 and receive an annual salary of at least £10,000. Personal contributions, tax relief, and funds from your employer equate to around 8% of your salary. This money amounts to a significant pension pot over the years, so think carefully before opting out.
- Regularly review your pension plan.
Making regular pension contributions is excellent, but it’s not enough. To maximise your funds, you must regularly review your pension plans. Leaving them unchecked could mean they suffer from poor performance or high management charges, and you will be none the wiser.
You are not alone if you don’t understand how much you are paying in fees or how your pension is performing. Amazingly, over 70% of pension holders have no idea about these aspects of their investment. Yet, you could significantly boost your pension fund with one or two minor improvements.
For instance, a 0.5% reduction in your management charges could grow your pension pot by £13,500 over its lifetime. Similarly, an improved performance of 1% could yield an additional £27,000. A regulated financial advisor can help you keep on top of these aspects of your pension and others.
- Understand your State Pension entitlement.
You must have contributed National Insurance for 35 years to receive the maximum State Pension. However, even though you qualify for this amount, you should not rely solely on the state pension for your retirement income. Although it is an excellent supplement, it is unlikely to be sufficient to support you on its own. If you have any gaps in your contributions, you can either bridge these with top-up payments or receive a reduced State Pension.
- Trace any lost pensions you might have.
You could have more retirement savings than you think. If you’ve changed employment throughout your career, you could have several workplace pensions. When you stop contributing to these, it is easy to lose track of them. However, the money you’ve contributed to them is rightfully yours, so you should track it down. Suppose you allow them to sit dormant for too long. In that case, your money could be eroded through poor investment performance or high management charges.
- Claim the maximum allowable tax relief.
Tax relief on your contributions is one of the most significant benefits of a pension. The good news is, as a basic-rate taxpayer, you don’t have to do anything. Your employer or pension provider reclaims your tax on your behalf. However, you must reclaim tax yourself if you are in a higher tax bracket.
- Make top-up payments whenever possible.
Paying a little extra into your pension fund can make a huge difference. Remember, your contributions qualify for tax relief, so for every £50 that goes towards your retirement fund, you only pay £40. Also, compound interest means even small top-up payments can grow significantly over time. Indeed, additional contributions of just £100 per month could reap you £56,000 more for retirement.
- Carry your annual allowance over.
You can pay up to £40,000 into a pension fund each year without paying tax charges. This amount is called your annual allowance which includes your employer’s contributions. You are able to carry forward any allowance you haven’t used from three years previous. However, you must first have used all of the current year’s allowance.
- Talk to a regulated financial advisor.
Many people avoid speaking with a financial advisor because they believe it will cost them money. On the contrary, those who receive professional financial advice have an additional £27,000 in their retirement funds compared to those who don’t. Which category would you prefer?