TOP 10 TIPS FOR BOOSTING YOUR PENSION SAVINGS
With State pension provisions far from generous, it is likely you will need to build a pot of savings in order to spend your retirement in the way that you would wish. Tim Walker, Divisional Director and Head of Office, Brewin Dolphin Exeter, suggests 10 ways you can boost your pension savings:
1. Start saving early
If you are not already paying into a pension then you should start as early as possible. The sooner you start, the more time there will be for your pension investments to grow.
2. Join your employer’s pension scheme
Many employers offer pension schemes but not all staff members take them up. Over the next few years it will be compulsory for all UK employers to do this under ‘auto enrolment’ – both employers and employees will be required to contribute. While you can opt out, you would effectively be giving up an increase in total pay from your employer.
3. Use tax breaks
The government offers tax reliefs on pension contributions at an individual’s marginal rate – the amount of relief ranges from 20% to 45%.
4. Take advantage of ‘carry forward’
The maximum pension contribution amount on which tax relief can be claimed in the current tax year is 40,000*. However, the ‘carry forward’ rules allow you to utilise unused relief from the previous three tax years – this means you may be able to make a contribution that is higher than the 40,000 annual allowance.
5. Non-tax payers can benefit from tax reliefs too!
Even if you do not pay income tax you can receive 20% tax relief on pension contributions up to a maximum of 3,600 in a tax year. The most you can pay in is 2,880 and the contribution will be topped up with tax relief to make it 3,600.
6. Use salary sacrifice
This involves you giving up some of your salary (or all or part of any bonuses) in exchange for a pension contribution from your employer. It means you couldalso pay less income tax while both you and your employer will typically pay less National Insurance.
7. Increase pension contributions
It makes sense to increase your pension contributions over time. As little as 10 extra a month could go a long way, particularly if you do this in the early part of your career.
8. Monitor your pension
Pension contributions are typically paid into investment funds, which need to be monitored to ensure that they are performing as expected. If they are not, it makes sense to get specialist advice about improving the performance of your pension savings.
9. Keep an eye on charges
The charges on pension funds vary across the market. While these charges are generally lower than in the past, it is important to seek guidance if you think you are paying too much.
10. Track down old pensions
You may have lost touch with some of the pension schemes you have enrolled in over your working life. The free, government-backed Pension Tracing Service (www.gov.uk/find-lost-pension or call 0845 600 2537) can help you track them down.
Overall, the pension’s regime is complex, so it is vital to get expert advice tailored to your situation. A specialist financial planner can talk you through all the options for saving for an enjoyable retirement.
*This also encompasses employer pension contributions and benefits built up in final salary schemes. From April 2016, this amount will be reduced for individuals with incomes of over 150,000, including the value of any pension contributions.
The value of investments can fall and you may get back less than you invested.
No investment is suitable in all cases and if you have any doubts as to an investment’s suitability then you should contact us.
Any tax allowances or thresholds mentioned are based on personal circumstances and current legislation, which are subject to change.