When you’ve got bills and other financial commitments on your plate, finding enough money for your pension might not always easy. Here are six simple things you could consider:
Remember, investments can fall as well as rise, and you may get back less than you paid in.
1. Changes in your pay could help your pension
When your salary changes, the amount you and your employer contribute to your pension may also change. When you get a pay rise, the amount you are paying into your pension could automatically rise, giving your retirement a boost. You may choose to direct more of your pay rise into your pension, if you felt you could afford this. Our Retirement planner tool can help you model the impact of pay rises or contribution increases on your pension
2. Regular expenses and your pension
If a regular payment - such as a loan or subscription finishes - it could create some flexibility in your budget. You could consider how this could fit into your overall financial planning, including your pension.
3. Employer contributions
If your employer contributes to your pension, it’s worth understanding how their contributions work and how they might affect your total retirement savings. Some employers increase the amount they pay in when you increase your contributions (up to a certain limit). Each employer's agreement is different, so it’s important to check the details of yours.
4. Understanding lump sum contributions
If you receive additional income, such as a bonus, you may have the option to add a lump sum to your pension. This could also qualify for tax relief (up to certain limits), depending on your circumstances. Tax relief is one of the biggest benefits of paying into a pension, as the amount you pay in won’t normally be taxed. So, if you're a basic-rate taxpayer, every £100 you pay in actually costs you £80. If you're a higher or additional rate taxpayer, you can save even more. Depending on the type of pension you’re in, you may have to claim any higher or additional tax relief through your self-assessment return. Your tax treatment depends on your individual circumstances and may be subject to change.
5. Changing when you access the money in your pension
When you start taking money from your pension can affect how long it lasts and how much it may grow. Leaving your pension invested for longer can allow more time for potential growth, but this may not be the right choice for everyone.
6. Where your pension is invested
Where your pension is invested can have a huge impact on what you’ll get back when you retire. For example, if your scheme has a 'default' investment option -- where your money is automatically invested when you join the scheme -- it may not be the most suitable for you. So, it’s worth looking at which investment fund/s your money is invested in.
If you do decide to switch to another fund or funds, always remember that there’s no guarantee the new fund(s) will perform better than the old one(s). And it's important to remember that 'defaults' exist for a reason, and are designed to suit most pension savers
These ideas are for people with a defined contribution pension - schemes where you build up a pension pot based on contributions from you and/or your employers, plus any investment returns. This article is not intended to give advice or a personal recommendation. For tailored advice you should speak to your financial adviser. If you don't have an adviser, you can find an up-to-date list of regulated advisers at MoneyHelper.
