How can I boost my pension?

Since the introduction of automatic enrolment in 2012, most employers are obliged to put in place a workplace pension for their employees, and are required, along with the employee themselves to pay in a minimum amount. Depending on the employer, they may offer more generous terms than these minimum requirements, and no matter what these are, you need to check with the scheme administrator or your HR representative how you can make the most of these contributions.

Ensuring you maximise your contributions, as it normally comes out before you receive your take home pay, and in turn triggering the maximum from your employer, is undoubtedly a great way to save into your pension.

“But I’m self-employed!” we hear you say! Well, this is also a great opportunity to take professional advice and guidance, possibly from a range of sources such as your accountant or financial adviser, and you too can make positive contributions in a tax efficient way, at frequencies suited to you and your business.

If you reach State Pension age on or after 6th April 2016, then you’ll need at least 35 qualifying years of National Insurance contributions. This will get you the full new State Pension of £185.15 per week (2022/2023). Now, before you assume this is the same for everyone then it isn’t! Over the years the State Pension has been through much change, often controversial, but as we live longer and retire earlier than we historically did, the costs of providing it have become a Government affordability issue.

The surest way to know what your entitled to, and to see if you have any gaps in your records that might reduce your eventual income is to get your own new State Pension statement here: https://www.gov.uk/state-pension-statement

If you do have any gaps in your qualifying years, because of things like bringing up children or being out of work due to health issues, then you can find out how to improve your records and at what cost.

Some would say that paying into your pension is a bit like saving your own money now, to pay yourself later in life. This sounds a lot better than spending it or viewing the monthly payments as a pure expense, and after all putting your own money aside for yourself, especially when you get a pay rise is a good thing to do.

So the best way to go about this, is to work out what you can afford to pay in now, and if and when you get a pay rise, consider using this to increase your pension contributions and that way you’ll get an extra payment from the tax relief that comes with it, making it feel like a real boost.

The same goes for bonuses – if this is something you get from time to time, and you want to really boost your retirement savings, then considering re-directing some or all of a bonus into your pension, before you get it, can also benefit from tax relief. This is something to talk to your employer about, or if this isn’t possible directly, then it’s still possible to make lump sum payments into most personal pensions.

Making sure that your financial affairs are in good shape on an ongoing basis is a key factor is making the most of them. For example, where your money is invested and what fees you are paying can make a considerable difference to the eventual amount you’ll save over a long period of time.

As pensions tend to be very long-term investments, ensuring they are invested in a way that matches your attitude to risk and your investment preferences in particular, will help you feel more comfortable and engaged with what’s happening over time.

Economies tend to go through cycles; Regulation is always changing; Your circumstances will inevitably also go through change, and all of these factors and more can be catered for within an on-going advice arrangement.

Research tells us that “fostering an ongoing relationship with a financial adviser leads to better financial outcomes” (What it's worth - Revisiting the value of financial advice - ILCUK) This comes from a piece of research by the International Longevity Centre UK (ILCUK) that reports “those who reported receiving advice at both time points in our analysis had nearly 50% higher average pension wealth than those only advised at the start”.

This goes to show that setting something up well at the start is simply the beginning of the journey. Plans and arrangements require consistent monitoring and reviews alongside a supportive retirement specialist to be truly effective.

If you are nearer to retirement and have the feeling that you might not have enough to meet your needs, then there are two stand-out choices to make a huge difference to the end result.

It stands to reason that the longer you leave something, it will retain greater potential for growth over more years, and because you’ll then need to take from it for less years, this could create a double win. Of course, you need to remember that as with all investments, there is no guarantee that you will grow your money, as investments can fall as well as rise and you might not get back what you put in.

What is pretty clear though, is that taking too much money out, too early, will significantly increase the risk of running out over the long term. Working alongside a retirement specialist will help you to work out the appropriate amount to withdraw in a sustainable way so you can be more confident that you are matching your lifestyle to your resources.

You can also choose to pay in more which is something we cover in more detail in our Saving into your Pension pages.

Since April 2015 you have greater choice over how you use your pensions, and because of these wider, often more flexible arrangements, fraudsters and scammers have been on the increase using more sophisticated ways to entice savers to part with their money.

For more information on this, head over the Money Advice Service How to spot a pension scam - Money Advice Service which has some great advice, and also further links to the FCA’s ScamSmart website which is a tool to help you check if an investment or pension opportunity is a scam.