8 Pension Boosting Tips

4th June 2024

If you want to optimise your pension, starting early, making regular contributions, and maximising your employer’s contributions are just a few of our 8 pension boosting tips that can significantly boost your pension fund over time.

In this blog, we will explore several key tips to help you build a substantial retirement. From the importance of starting your pension contributions early to taking advantage of new pension allowances, we’ll cover practical steps you can take to help you build a financially secure future.

Whether you are just beginning to save or looking to optimise your existing pension plan this is your 8 pension boosting tips.

1. Start paying in as soon as you can

The sooner you start saving, the more time you’ll have to reach your goals.

Here are some examples of how much your pension could be worth by the time you’re 68 if you pay in £300 a month (increasing by 3% each year), depending on when you start. These figures are based on assumed annual growth of 5% after any charges. They also don’t take inflation into account. These figures are an illustration and what you get will depend on several factors including your investment performance.

2. Regularly increase how much you pay in

If you can afford to, it can make sense to increase your contributions regularly.

Imagine you start investing £600 Gross (£360 net) a month in a pension from age 30 with annual increases of 3%. You could end up with a pension worth over £1 million at age 68.

This assumes investment growth of 4% each year after charges. It doesn’t consider inflation, which erodes the value of money over time.

3. Make sure you’re maxing out your employer contributions

If you have a workplace pension, your employer will be making regular contributions into it. One potential quick win is to find out the maximum your employer will pay in and make sure you’re taking advantage of that opportunity, if you’re able to.

While lots of employers only pay the minimum set out under auto-enrolment rules (pension contributions equal to 3% of your qualifying earnings), others are willing to pay more. Your employer could be too.

4. Consider making a lump sum payment

Making a larger contribution – even as a one-off – can have a significant impact on your retirement fund. And if left invested for several years, could leave you with a much larger pension than you otherwise would have.

If you decide to significantly boost your pension, you could pay in more than £60,000, by using unused allowance from previous years, provided you also have sufficient earnings. This is known as the carry forward rule.

5. Stay on top of your pension if you take a career break

Career breaks often mark the start of a major life change like starting a family or looking after an elderly relative. But it’s important your pension doesn’t fall off the agenda.

Stopping your pension contributions for even a relatively short time could have a huge impact on your retirement savings. If you’re taking a break to go on paid parental leave, it could pay to keep your pension contributions going if you can. That’s because your contributions will normally be based on your actual earnings during that period (which are likely to be lower). But any employer contributions will continue to be based on the level of earnings you were getting before.

6. Avoid dipping into your pension unless you really need it

You can usually access a pension from age 55 (rising to 57 in 2028). You can normally take up to 25% tax-free (up to a maximum of £268,275) and the rest is taxable.

Many people choose to access their tax-free cash to pay off expenses, like a mortgage or to make a big purchase. But if you can afford to, it makes sense to leave your pension untouched until you plan to retire.

7. Watch out for the new allowances which replaced the Lifetime Allowance

There used to be a limit to the total value of pension benefits you could build up throughout your lifetime and generally receive up to 25% tax free. This limit was known as the lifetime allowance and was set at £1,073,100 for most people. However, from 6 April 2024, the lifetime allowance was abolished and replaced with three new allowances. These are the lump sum allowance, the lump sum and death benefit allowance, and the overseas transfer allowance.

Read more about new allowances for 2024/25 in our recent blog: Spring Budget 2024 – What It Means For You.

8. Track down old pension pots and consolidate them

Around £27bn has been left unclaimed in the UK. If you’ve moved jobs or changed address you could have an old pension waiting to be found.

If you are hoping to build up a sizable retirement pot, check the whereabouts of all your old pensions and claim back any that have been misplaced.

Taking Action

Visit our Pension Calculator to give you a much clearer view on where you are heading. You will receive an instant, personal calculation straight to your inbox.

Ready To Take Control?

If you are serious about taking control of your future and looking for independent advice about your pension and investments get in touch with our team today. Book a one-hour free consultation worth up to £300 with an Independent Financial Adviser.

Call: 01244 347583 Email: info@innesreid.co.uk or send our team a message below…

8 Pension Boosting Tips – PLEASE NOTE: This article is not personal advice. The content should not be relied upon in its entirety and shall not be deemed to be or constitute advice.

We cannot accept any responsibility for any action taken or refrained from being taken as a result of the information contained within this article. Please obtain professional advice before entering into or altering any new arrangement.

Source: Hargreaves Lansdown