5 Top Tips To Boost Your Pension Savings

It was recently revealed in the media that the amount we need to enjoy a ‘moderate’ retirement has increased by £8,000 per annum, a 38% increase, in just one year.

The rise has primarily been attributed to rising food and energy costs, researchers said.

The Pensions and Lifetime Savings Association (PLSA) used evidence from focus groups to make the estimates of what we would need when we retire. The calculations were pitched at three different levels – minimum, moderate and comfortable.

They estimated that a single person needed £14,400 a year for a minimum income, rising to £31,300 for a moderate level and £43,100 a year for a comfortable retirement. Couples required a joint £22,400 at the minimum level, £43,100 at a moderate level, and £59,000 at a comfortable level.

It was also reported that women typically need to work for an extra 19 years to retire with the same pension savings as men, according to a report from the Pensions Policy Institute (PPI). These statistics combined make for some rather dismal reading.

However, with some careful planning and advice from a financial planner, you could help to boost your pension pot. Here are 5 ways to do that.

START EARLY

When we are young it can be difficult to think ahead to what our golden years will look like, however, the earlier you start saving the less it will cost you to retire early. This is due to the effect of compound investment returns over time combined with the additional contributions you can make into various tax wrappers by putting money aside earlier in your career.

EMBRACE AUTO-ENROLMENT

Whilst having to sacrifice 5% of your current monthly income may seem steep in some people’s eyes, using your workplace pension scheme to save every month will bring a welcome boost to your pension pot further down the line. With a 3% contribution made by your employer and tax relief on top, you could be missing out on vital additional capital by not signing up.

CONSIDER ADDITIONAL PENSION PRODUCTS

In addition to workplace pensions, consider other pension products such as personal pensions or self-invested personal pensions (SIPPs). These options often offer greater flexibility and control over your investments, allowing you to tailor your pension savings strategy to your specific needs and risk tolerance.

CHECK YOUR NATIONAL INSURANCE (NI) CONTRIBUTIONS

The maximum state pension is available once 35 years of NI contributions have been made. Those reaching SPA after 2051 will automatically qualify however those born before 1983 could get less or more in total due to the new transitional SPA arrangements noted above. You can request a forecast of your state pension online and, if it comes up short, consider paying in extra voluntary contributions.

As it stands, you can sometimes pay for gaps from more than 6 years ago, depending on your age.

If you are a man born after 5 April 1951 or a woman born after 5 April 1953, you have until 31 July 2023 to pay voluntary contributions to make up for gaps between tax years April 2006 and April 2016 if you’re eligible.

Since 31 July 2023, you can only pay voluntary contributions for the past 6 years. This may not be enough to qualify for a new State Pension if you have fewer than 4 qualifying years on your National Insurance record. You’ll usually need at least 10 qualifying years in total.

TAKE ADVANTAGE OF TAX RELIEF

Pension contributions benefit from tax relief in the UK, meaning the government adds to your pension pot. Basic rate taxpayers receive 20% tax relief on their contributions automatically, while higher and additional rate taxpayers can claim additional relief through their tax returns. Make the most of these tax benefits by maximizing your contributions within the annual allowances.

For more advice about planning for the future and how you could boost your pension funds, please contact a Finura planner.

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Sources: Women ‘need to work extra 19 years’ to build same pension pot as men | Money Marketing (07.02.24)
Pension income needed to retire jumps as family costs rise – BBC News (07.02.24)
Income needed for a moderate retirement soars by 38% – FTAdviser (07.02.24)