When it comes to the pot of money you have available for your retirement, size certainly matters. Of course, the exact amount of money you have will depend upon your financial situation and your aspirations for retirement. However, suffice to say, you will want to have as much as possible.
As well as the lifestyle you want in retirement, the age you retire will also influence the size of your retirement fund. In this brief article, you can discover five ways to maximise your pension and retirement savings. You will also learn how your planned retirement age compares with the national average and other factors that could affect your retirement plans.
Five Pension Maximising Tips:
- Start Immediately
Time is ticking towards your retirement, and every day you put off saving into a pension is a day less than your pension can grow. Therefore, the sooner you start saving, the better, as you will have more time to pay into your pension and the longer it will be invested. So, if you haven’t done so already, start saving immediately.
- Make Top-Up Payments
Making top-up payments into your pension fund will give it a significant boost. Even small top-up payments every month will grow significantly as they will benefit from tax relief and long-term compound interest.
- Stay In Your Workplace Pension
If you opt out of your workplace pension, it could cost you tens of thousands of pounds over years of absence. Your employer makes contributions equal to 3% of your gross salary, so you would miss out on this ‘free’ money if you were to opt out. Also, personal contributions to your pension qualify for tax relief, which equates to another 1% of your salary that would typically go to the government.
- Check Your Pension Regularly
If you’ve already started saving into a pension, that is excellent. However, you also need to keep a regular check on how it is performing. High management charges or poor performance can eat into your pension’s profits and deteriorate your retirement funds. If you need help in checking and assessing your pension, you should consult a regulated financial advisor. They will help ensure you have as much in your pension pot as possible.
- Retire a Bit Later
An obvious way to boost your pension pot is to retire a bit later. Working for an additional couple of years will allow you to pay more into your pot. It will also give your existing funds longer to benefit from compound interest growth.
Factors Affecting Your Retirement Age
When you stop working is ultimately up to you, and several factors could influence when you decide to retire:
Longer Working Lives. There is no doubt that people are working longer than they did a decade ago. Today, there are around 14.3% more women aged 60-64 in work compared to 1998. The number of 65-69-year-old men still working has risen from 15% ten years ago to over 25% today. These trends are bound to affect the date you decide to retire.
Rising State Pension Age. The age at which you can receive your State Pension has been rising since 2010, and today men and women receive their payments at sixty-five. However, almost half of women have plans to work until they’re sixty-seven. The full weekly State Pension is currently £179.60. If you feel this amount is insufficient to support your retirement lifestyle, you should consider putting other financial plans in place if you have not done so already.
Greater Pension Freedom. Pension freedoms introduced in 2015 mean that you now have more options over what you do with your pension funds. From fifty-five, you can now access some of your funds or the whole amount. The first 25% can be taken tax-free, but any amount after that is subject to tax. Therefore, you should be wary of taking more than the tax-free sum as it can affect your annual tax burden. Also, taking money from your pension pot early could leave you short of income in retirement, so you should consider your decisions carefully.