Giving your pension savings a boost and assessing where you stand can give you some peace of mind that you are on track for a comfortable retirement. After all, the sooner you act to sort out your pension, the more you could benefit over the long term.
And it needn't be complicated. From increasing your contributions to checking your underlying investments, there are plenty of ways you can improve your chances of a financially comfortable and secure retirement.
That said, the precise amount you need to save and the opportunities available to you will depend on your personal situation and retirement goals — these are things that an adviser can help you clarify, and help you put a plan in place to make sure you get there.
If you're looking for places to get started, however, here are five tips.
1. Track down old pension pots and consolidate
The days of jobs for life are long gone, and the likelihood is that you'll pay into several workplace pension schemes throughout your career — something that can be a real administrative headache. But that's just one part of the puzzle: what's even more important is that your money is probably invested in each workplace's default pension funds, which may not have the greatest growth potential over the long term, or be sufficiently diversified.
One option is to consider consolidating several small pension pots into a larger one to potentially benefit from cost savings. However, a detailed review by an adviser may be essential, as some older-style pension plans come with valuable guarantees which may be more beneficial for you to retain.
2. Reassess your retirement goals
Your retirement plans may have changed following the impact of the pandemic. You may have decided to delay retirement to give your investments the chance to recover in value, or perhaps you have decided on a phased retirement while accessing your pension.
Alternatively, you may need to retire earlier than planned and start taking your pension benefits. This could mean taking the 25% tax-free lump sum and a taxable income from the remaining fund, or a combination of the tax-free cash and taxable income in tranches on a flexible basis. Under the flexi-access drawdown rules there is no limit on the amount people can withdraw each year, but the length of the time the fund will last depends on the levels of withdrawals and the growth achieved on the remaining fund.
3. Boost your pension tax-efficiently
If the pandemic has altered your retirement plans you may need to see what you can do to boost your pension over the next few years. As we've entered a new tax year as of 6 April 2021, it is worth checking how much you are able to contribute, subject to limits on receiving tax relief.
Remember, you may be able to make use of any unused allowances from the previous three tax years once you have used this year’s allowance. You may also, for example, divert work bonuses into your pension through salary sacrifice. Now may be a good time to get relief at your highest rate of income tax on pension contributions, given speculation that rules may change in the future to boost the country’s finances in the wake of the pandemic.
You could also continue to reinvest dividends rather than turning on the income tap as soon as you reach age 55. You can continue paying into your pension and benefit from income tax relief until age 75 (subject to limitations). Alternative investments, such as ISAs, may also be a tax-efficient way to save towards your retirement.
4. Check how your pension is invested
Given the volatility endured by investors during the pandemic, you may want to assess how your pensions are invested and managed. Investments left neglected may not have held up well on the downside, for example, or might not have participated in the market recovery.
Yet keeping up with events that may impact on your pension can be time-consuming. Using the services of a discretionary manager is one option to take away the headache of constantly monitoring your portfolio.
5. Seek advice
An expert can help tailor a strategy to achieve a comfortable retirement. Retirement income typically comes from a variety of sources, including savings, investments and pensions.
An adviser can build a financial plan to maximise the potential benefits of your money over the long term, and maximise any tax planning opportunities. If you're keen to find out more, you can read about Brewin Dolphin's services at www.brewin.co.uk.
Important information
The value of investments, and any income from them, can fall and you may get back less than you invested. The opinions expressed in this document are not necessarily the views held throughout Brewin Dolphin Ltd. Information is provided only as an example and is not a recommendation to pursue a particular strategy. The information contained in this document is believed to be reliable and accurate, but without further investigation cannot be warranted as to accuracy or completeness. Tax treatment depends on the individual circumstances of each client and may be subject to change in the future.
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