Check out these five tips on maximising your pension savings
Many people say that size doesn’t matter, but this is certainly not the case when it comes to your retirement funds. Regardless of the lifestyle you want to have in retirement, building up as big a retirement fund as possible should be your focus.
How much you’ll need to retire depends on when you want to do, and your plans for when you stop working. Whatever these plans are, they will cost money, so you want to take every opportunity to boost your retirement funds. As always, taking financial advice from a regulated advisor such as Portafina is highly recommended.
Therefore, read on to discover five ways to maximise your pension savings.
5 tips on maximising your pension savings.
1. Get started immediately.
A pension is a long-term investment that benefits from compound interest growth. Therefore, starting to save into your pension immediately will maximize its time to grow before you retire.
2. Make top-up payments.
Making even small regular top-up payments to your pension can significantly affect its growth over time. Remember, you receive tax relief on all your pension contributions, including top-up payments. Also, any additional amounts you contribute will benefit from compound interest growth.
3. Stay in your workplace pension.
Although you have the option to do so, you should not opt-out of your workplace pension scheme. These auto-enrolment schemes have become a silver lining to the cloud left by the demise of final salary pensions. A workplace pension means at least 8% of your salary’s value gets invested into your retirement fund.
4. Regularly check your pension.
Regularly checking your pension will enable you to ensure it remains suitable for your lifestyle. Regardless of your pension pot’s size, if you are paying too high charges or it is underperforming, its value could be eroding quickly. Therefore, ensure you check on it regularly.
5. Extend your contributions.
Working a few additional years will enable you to contribute to your pension for longer. Even just one or two years means your pension will have more time to accrue compound interest. You’ll also receive tax relief during these additional years of work.
What things affect the age at which you retire.
Three main factors will affect the age at which you can retire:
People are extending their working lives.
Over the past decade, the number of people aged between 60 and 64 has grown significantly. Indeed, today, almost double as many women are employed as were in work in 1998. Around 25% of men between 65 and 69 are unemployed compared to 15% a decade ago.
Rising State Pension qualifying age.
Today, for the first time in more than 100 years, men and women have the same State Pension qualifying age. The qualifying age for women has been steadily rising over recent years to achieve equality. This trend is likely to continue for both men and women. The maximum State Pension you can receive currently stands at £179.60 per week. You should consider whether this is sufficient to support your retirement lifestyle. If not, you should put other retirement income plans in place.
Greater pension flexibility.
Legislation introduced in 2015 means you now have more flexibility over accessing your pension funds. Many pension holders can access their money at 55 and take up to 25% as a tax-free cash lump sum. In certain circumstances, this can be beneficial. However, you should consider whether you will have sufficient income in your retirement if you take too much cash early as a lump sum. Before making any decision, it is advisable to seek regulated financial advice.