Are you ‘mid or late career’ or planning to retire within ten years? If the answer is ‘yes’, then you probably want to know the answers to these questions: Will I be able to retire when I want to? Will I run out of money? How can I guarantee the kind of retirement I want?
But, for many different reasons, planning for retirement is a commonly overlooked aspect of personal financial planning and this can often lead to anxiety as the timing of desired wind down approaches. With this in mind, you may want to consider the following options for boosting your pension savings.
Review Your Strategy
A missed opportunity for many pension holders is failing to choose how their pension is invested. Some people leave this decision in the hands of their workplace or pension provider. Many pension providers will give you several options for investment strategies. The key is to ensure you are adopting an appropriate level of risk that reflects your future needs and tolerance to investment risk.
Review Your Contributions
Sometimes the simplest solutions are the most effective. If you want to boost your retirement savings, the simplest solution is to increase your contributions. You may think you cannot afford to, but even a slight increase can make a big difference.
The reason why a relatively small increase can result in such a large increase in the value of your pension pot is down to the power of compounding. In simple terms, compounding is the beneficial impact of achieving growth on previously accumulated growth. The earlier you invest your money, the more you benefit from the effects of compounding. Adding more money to your pension pot by increasing your contributions just makes the compounding effect even greater.
Know Your Allowances
When you save in a pension for your retirement, the government adds tax relief on top of the money you contribute. This helps you to grow your savings faster. However, there is a limit to the amount of contributions you can claim tax relief on each year, which is called your ‘annual allowance’. This is typically £40,000 (tax year 2021/22), but in some cases may be lower.
If you want to contribute more than your annual allowance into your pension in one tax year (for example, if you have received a windfall and want to put it aside for the future), it is worth knowing that you could potentially use any unused allowance from three previous tax years. We call this ‘Carry Forward’.
Trace lost pensions
Usually, starting a job with a new employer means starting a new pension. And, when that happens, some people may overlook the pension they had with their last employer. As a result, many people have pensions with previous employers that they have lost track of – and rediscovering them can give a huge boost to your retirement savings.
You can trace old pensions by getting in touch with the provider. Look through any documentation you still have from your past employers to see if you can find any pension information. Alternatively, you can contact the provider anyway and they should be able to find your pension by using details such as your date of birth and National Insurance number. If you are not sure who the provider is, start by asking your previous employer.
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