How can you make the most of your pension pot so you can get back to dreaming about your retirement and not dreading it?

Even with current conditions there are ways you can maximise your pension savings – listen to this podcast episode to find out more.

If you would prefer to read about it, there’s also a transcript below.


How to maximize your pension savings that enables you to get back to dreaming about your retirement and not dreading it, is this week’s topic.

Many people are feeling the pressure on their finances at the moment due to the backdrop of rising inflation and the cost of living soaring. In these circumstances it can be very difficult to think about your long term finances, or even contemplate saving for the future.

However, even in the current climate, there are ways to maximize the value of any pension savings that you have.

So let’s look at these inturn, the first one being free money from your employer.

Workplace Pensions

When offered the opportunity to join a workplace pension, it’s nearly always a good idea to do so.

For most people your employer must automatically enroll you in a workplace pension scheme. And you may be offered a pension plan if you don’t meet the criteria.

Workplace pension schemes are made up of your own payment, usually 5% or more your earnings, which are deducted from your salary, often before you pay tax, making it easy to save and your employers contribution on top of that, which at the very least must be equivalent to 3% of your earnings.

Many employers offer more than this. Or match any extra contributions that you make.

So it’s worth checking if you are getting the most out of this valuable benefit.

Next, extra money from the Government.

Extra Money From The Government

Anyone who decides against investing in a workplace or personal pension, also turns down help from the government. And that’s because in order to encourage people to save for retirement, the government provides a top up called tax relief to your pension payments.

How you receive tax relief depends on the type of plan you have and the rate of income tax that you pay.

But as an example, if you are a basically taxpayer saving into a personal pension in the current tax year, you will get 20% tax relief on your payments.

So if you pay £200 a month into your pension plan, the £40 of tax relief you receive on that payment, means it will only cost you £160.

High rate or additional taxpayers can claim back even more.

Some workplace pension schemes, offer tax relief in a different way, such as through salary sacrifice or exchange schemes. So check with your employer if you’re not sure how this works for you.

And in Scotland tax relief details differs slightly, but in all these cases, the general point is the same. Each time you defer paying into a pension plan, you miss out on an extra boost of tax from the Government.

How to get extra money from the Government

State Pension

Next the state pension will not cover everything.

Another common mistake is to assume that the state pension will meet your retirement needs.

This is a big, big mistake.

However, it’s important to know that the state pension won’t be available until you are late 60’s and may not cover all of your outgoings. Currently the new flat rate state pension is £185.15 a week, or just over £9,600 a year.

At the same time, the pension and lifetime savings association calculate that a single person needs at least £10,900 a year for just a minimum standard of living in retirement, which rises to £20,800 a year for a moderate lifestyle. Which includes a car and some help with maintenance and decorating each year, etc.

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Keep Track and Top Up

Next, keep on track of all your pension plans.

If you have moved jobs or home a few times and not informed your pension provider then one of these pensions could be lost. So it’s worth spending time tracking down any potential missing pots to help boost your future finances.

Another point to consider is that the minimum contribution is unlikely to be enough.

Auto enrolment has boosted the pension savings of millions of people, but the 8% minimum payment, may not get you the retirement style that you want.

Therefore it’s important to have a retirement lifestyle in mind and the pension and lifetime savings association calculations can be helpful to you as they give you a real figure to aim for. And you can then work out what’s feasible and put the necessary steps into place to help you achieve your goals.

Pension Calculator

Review Your Pension Regularly

Another factor is to review your pension on a regular basis.

You might not want to talk about your pension plan every day but dismissing pensions as boring is a big mistake. And one that becomes increasingly more serious over time.

While this might be difficult at the moment steps such as topping up your payments, especially in your 20’s, 30’s or early 40’s can make such a big difference thanks to the snowball effect of compounding.

Understanding your workplace or private pension, making sure you know how to get free payments from your employer or the government or using it to pay less tax, such as through bonus sacrifice, could make a major difference to your long term finances and your happiness in retirement.

Where Is Your Pension Pot Invested?

And lastly understand where your pot is invested.

Another mistake is not knowing where your pension pot is actually invested. Whether that matches your life stage and priorities or how to choose the right investment options.

For example, if your retirement is still some years ahead, you could potentially afford to take a little more risk.

Conversely, you may want to dial down the risk as you get nearer to retirement.

Get In Touch

So in summary, these are just a few of the considerations to take into account when maximizing your pension savings. And if you need any help, with your retirement plans, then please get in touch.

Get started with a free 30 minute call:

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