Top Tips for Your Retirement Savings

Many people are unsure exactly how much their pension savings are worth and/or what level of retirement income these savings might provide. 

The Retirement Livings Standards, from Pensions UK, are based on independent research by Loughborough University and suggest the following post-tax retirement incomes each year, depending on your standard of living:

• Minimum: £13,400 single or £21,600 for a couple (covers basic needs and some left over)

• Moderate: £31,700 single or £43,900 for a couple (more security and flexibility than minimum)

• Comfortable: £43,900 single or £60,600 for a couple (more freedom to afford luxuries)

Do you know how much your pension savings are and whether they are on track to provide your desired income…? 

Can you make additional pension contributions?

The best way to help boost your pension savings is by contributing more.

If you increase your workplace contributions, many employers will match your contribution level so it’s worth speaking with your employer to find out your options.

Could you divert pay rises or bonuses into your pension savings or make occasional lump sum pension contributions?  If these could be options, make sure to consider potential restrictions such as annual allowances and relevant earnings and if in doubt, always seek financial advice.

Is it worth consolidating your pensions?

Do you have more than one pension pot, perhaps from moving jobs over the years?  It may be worth considering if consolidating them would be advantageous. 

Apart from the reduced admin, often consolidating can save you money through lower fees, provide increased investment diversification opportunities and greater flexibility on how and when you choose to take your retirement benefits.

Before making any decisions though, it’s important to check that you won’t be giving up any valuable guarantees or paying any hefty exit penalties.

Any potential lost pensions?

Might you have a pension from a former employment that you have lost track of or even forgotten about completely…? 

Many people have and these pensions can be worth thousands! So long as you know the name of your former employer or the pension provider, you can start your search by using the Government’s Pension Tracing Service at www.gov.uk/find-pension-contact-details.

Are you reclaiming tax relief?

Many private and workplace pensions are set up on a ‘relief at source’ basis, where contributions are deducted from your salary after tax has been paid.  The employer takes 80% of the contribution from your after-tax salary and reclaims the additional 20% basic rate relief from HMRC on your behalf.  

In this arrangement, if you are a higher or additional rate tax payer, and therefore entitled to tax relief above basic rate, then you will need to reclaim this tax relief yourself which you can do via self assessment.

If you’ve missed reclaiming in the past, don’t worry, you can backdate your claims 4 years.

Please note, this isn’t applicable if you’re in a salary sacrifice or net pay arrangement (where your contribution is taken from your salary before income tax is deducted) as there should be no need to reclaim.

Cashflow

Asking your financial adviser to carry out cashflow planning with you can you help to determine if your pension savings will be appropriate to support your chosen retirement lifestyle. 

It’s also a good way of illustrating the impact of additional pension contributions on your overall financial picture.

 This is not financial advice. For financial advice, please consult a financial adviser.