When you’ve got bills and other financial commitments on your plate, finding enough money for your pension isn’t always easy. But it can still be done – and the sooner you act, the more you could benefit. Here are six simple things you can try.
Note: these tips are for people with a defined contribution pension – schemes through which you build up a pension pot based on contributions from you and/or your employer, plus any investment returns. Like most investments, the value of your pension can go down as well as up, and you may not get back as much as has been paid in.
If you’re struggling to pay as much as you’d like into your pension, here’s a simple tip to help you save more. Start off by paying in whatever you can afford, then whenever you get a pay rise, redirect a portion of it into your pension. That way, you won’t get used to spending the money that’s headed to your pension – and you'll still benefit from some of your hard-earned raise going into your bank account.
You can try a similar move to the one above whenever a regular expenditure comes to an end. If you finish off paying a big bill, such as a car loan, you could pay the extra money into your pension. Even small increases can make a big difference – especially over the long term. And if you need to reduce your outgoings in future, it’s usually possible to reduce your contributions if you want to.
If your employer contributes to your pension plan, they might pay in a bit more if you do too. Some employers increase the amount they pay in when you increase your contributions too (up to a certain limit). So if you put in an extra percent or two of your salary, they might pay in more as well. Ask your employer for details of whether they contribute to your pension plan, and by how much.
If you come into some cash, paying a lump sum into your pension is a quick and easy way to give it a boost. And as with other payments into your plan, you're entitled to tax relief on the amount invested. This means £1000 paid into your pension will cost you £800, or even less if you pay more than basic rate tax. Your tax treatment depends on your individual circumstances and may be subject to change.
The longer you leave your pension untouched, the longer it has to potentially grow. And if you’ve already had your pension for a long time, leaving it invested for a few extra years can make a big difference. That said, it’s important to remember that there’s no guarantee your investments will grow. As we've mentioned already, investments can fall as well as rise in value, and you may not get back what has been paid in.
Working for longer won’t be for everyone, of course. But if you’re happy to do it, it’s a handy option to have.
Where your pension is invested can have a huge impact on what you’ll get back when you retire. For example you might have been automatically invested in your scheme's default investment option. While this is designed to be appropriate for most people it might not be right for you. If you're comfortable making your own investment decisions you might want to have a look at what other funds are available to you.
If you do decide to switch to another fund or funds, always remember to review your investments regularly. There’s no guarantee that one fund will perform better than the other.
Exactly how you make changes to your pension will vary depending on which type you have. However, with many modern schemes you can make alterations online with just a few mouse clicks. Check your policy information or speak to your employer to find out if that’s the case with yours.
And remember, the more money you pay in now, the longer it has to potentially grow. The compounding effect – where any returns your pension generates could, in turn, earn additional returns – can make a massive difference over the long term.
Get expert advice
Getting financial advice on your pension plans could help you make the right decisions to achieve your retirement goals.
Call: 0800 151 0673 where our financial advice support team can help put you in touch with a financial adviser. Alternatively, your employer may have a financial adviser you can speak to.
Feel you can't afford to save? See how much those 'little extras' cost you and what you could be saving.
A financial adviser can help you make sure your money’s on track to achieve your financial goals
It's easy to lose track of old pensions. Start by contacting your previous employer or contact the Pensions Tracing Service.