Even if retirement isn't far away, there are steps you can take to increase your retirement income to set yourself up for a lifetime of financial security.
Here are 8 practical tips to ensure your pension pot is as healthy as possible!
1.Review your pension regularly
Review your pension regularly
Millions of people in the UK take the first important steps of setting up their pension & retirement plan, but fail to follow them up by making sure their pension is prospering.
According to research, 1 in 4 people have never reviewed their pension plan, whilst this will not affect your daily life- it could have a serious effect on your comfort in retirement.
We advise you to review your pension to ensure it's on course to provide your retirement income needs.
Many of us gather pensions through the workplace, when leaving jobs we tend to leave behind separate pension pots. They may be easier to manage if they are consolidated, you should consider transferring them under one platform such as Personal Pension or Self Invested Personal Pension.
It is important you seek financial advice before considering combining your pensions, personal circumstances and risk profile means the advice for one person may not be the same for everyone. There are of course some pensions which it may not be wise to transfer, therefore seeking advice is vital.
3.Monitor Pension Investments
Monitor Pension Investments
With our Portfolio Management Service (PMS), we have developed and constructed risk rate portfolios to ensure that our recommended asset allocation closely matches your personal circumstances.
The performance of your pension fund can make a huge difference to your retirement, our clients receive investment proposals detailing how, and where is best to invest your portfolio. We take into consideration your retirement plan, attitude towards risk and current market conditions.
4.Watch out for high charges
Watch out for high charges
If you have a pension which was set up between 1980 - 2000, charges were often much higher than they are today. Plans set up back then may have you paying more in charges, they tend to take a fixed monthly fee or a percentage of the monthly contributions.
5.Review your investment risk
Review your investment risk
Contributions into a pension will almost certainly be invested and therefore subject to investment risk.
Risk is one of the most important factors when it comes to investing your money for the future. We carry out an attitude to risk questionnaire to find out the risk balance between the amount of risk you are willing to take, and the potential return you're likely to get over your investment period.
If you have a long time before you retire, you may be prepared to take a bigger risk with your investments, as you get closer to retirement you will be more cautious.
We advise our clients to continually review their investment position as past performance does not reflect on future investments. This helps to manage investment risk and prevent any loss.
6.Maximise your pension contributions
Maximise your pension contributions
Pension contributions are the single most effective way of boosting your retirement fund. Many people start saving for their pensions later in life, quite often people have periods where they don't contribute at all. Most people pay too little into their pensions throughout their working life.
It makes sense to top up your pension wherever possible, this could be a lump sum or monthly contributions. You should consider keeping on track of your payments to ensure you reach your retirement goals and income needs.
You can usually make additional savings to your existing workplace pension scheme. Alternatively, you should consider taking advantage of pension tax relief. The higher rate of your tax, the more tax relief you can receive, including non-earners. Basic-rate tax relief of 20% is added automatically.
For example: if your contribution is £400 the government will add £100. If you are a higher taxpayer, you can claim an extra £100-£275 depending on individual circumstances.
Salary or bonus sacrifice arrangement may not be the most popular way to improve your pension, but it can be one of the most efficient ways of contributing. Arrangements involve giving up some salary in exchange for a pension contribution from the employer. In doing this, you will pay a reduced amount of income tax, and usually make a saving on National Insurance tax.
8.Don't forget the spouse's allowance
Don't forget the spouse's allowance
You can invest into a pension for a non-working spouse or partner, it is one of the most tax-efficient ways to save, and could provide additional tax-free income in retirement. Pension income can be one of the best ways to make use of both tax-free allowances.
It is worth considering saving into pensions in both names, even if one of the the couples does not work. This helps to use both personal allowances when retirement incomes are taken and could potentially boost the amount of tax-free income as a couple.
Rules which took effect in 2015 mean investors have more freedom than ever when deciding how to take their pension. More choice can often increase the risk of making a poor decision.
If you have been put off planning and saving due to lack of understanding, you're not alone.
Planning will help you think about the changes you could make and enable you to take steps towards securing a better future.
Things you should think about:
Do you have your pension planning in order? If not, please contact us NOW!
It is important that no actions should be taken without advice, and the risk warning should be taken notice in all cases. Personal circumstances and risk profile mean that the advice for one person which may not be the same for everyone.