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Ways to boost your pension in the run-up to retirement
Whether you’re 40 years from retirement or you’re retiring next year it’s always worth exploring the different ways in which you can boost your retirement nest egg. This article will explore various ways in which you can grow your retirement savings.
Increase your contributions where possible
Depending on your retirement goals and objectives you may want to explore increasing your contributions. It is recommended you calculate a ballpark figure of how much you will require each year during your retirement. Once you have worked out this figure you can start to understand how large your retirement pot needs to be.
Most people plan their retirement around three main assets, their property, their pensionable savings and their cash savings. There are of course other asset classes which can be included but securing the first three is a good place to start.
As such, increased retirement contributions can come in to form of mortgage payments, pensionable contributions and further cash savings. It can be difficult to know which of the three should be prioritised. If you are not sure where to channel extra funds, you can request a complimentary consultation with a deVere advisor.
Delay the date at which you start receiving your pensionable income
This point does not apply to members of Defined Benefit schemes who will receive a fixed income for life. However, for members of defined contribution schemes, the longer you wait before drawing down, the larger the overall pot may be. Moreover, with investment-linked defined contribution schemes the pot will have a longer period in which the underlying investment can grow, which allows for a longer-term approach to be taken with the asset allocation.
Take advantage of autoenrollment
The Pensions Act 2011 makes pension automatic enrolment mandatory within the UK under certain criteria. The legislation means that employers have to offer you a workplace pension which both you and the employer pay into currently up to 8% of your annual salary. Your contributions are automatically deducted from your salary, additionally, your employer and the government also make contributions. Your employer must contribute a minimum of 3% of your annual salary up to a certain threshold (many employers chose to contribute a higher amount), the government contributes a minimum of 1% through tax relief. The legislation allows you to opt-out meaning all members have the option to cease making pensionable contributions. However, it is worth taking advantage of autoenrollment as the employer and governmental contributions are effectively ‘free money’.
Whilst this example applies to UK pensions only other countries have similar systems, for example, the US where some employers offer to match 401K contributions to a certain figure, moreover, Italy, Denmark, Japan and New Zealand also have legislation.
Make voluntary overseas NI contributions
Many British expats leave themselves in a vulnerable position by not putting money aside into pensionable savings. For Brit’s who live in countries without automatic pension legislation, for example, the UAE, pension savings after often overlooked.
One way in which Brit’s can boost their pension savings is by making voluntary overseas contributions to their national insurance. Brit’s currently need to make 35 years of contributions to receive their full state pension which is currently £8,750 per annum, for as little £12 per month a full state pension can be accrued. Expats can even backdate contributions for missed years.
Find out what you have
Most people throughout their career will hold a number of different jobs at different companies, meaning many people will have several different pension pots which are often forgotten about.
Currently, there are billions of pounds worth of unclaimed pensions in the UK. If you fall within that category our pensions team are on hand to help you uncover exactly what you have in place.
Investigate your pension
When you make workplace or private pension contributions your money will be directed into certain investment instruments including mutual funds or bonds. If you did not choose where your contributions are directed your scheme provider will do this for you.
If your investment fund has been under-performing, you should look to investigate why this is. Your pension performance depends on the performance of the underlying funds, there are a large variety of funds available on the market and if your pension is left unchecked you may not be in the most competitive fund. Seek professional advice in the form of a pension review to find out how to maximise your pension.
Make sure you’re not paying hidden fees
Depending on where your pension is being held, you may be paying hidden fees. Many funds, schemes and trustees have hidden fees or uncompetitive fees you may be unaware of. It is always worth seeking a second opinion who may be able to give you a thorough breakdown of the fees you are paying and a better path forward.
deVere Group specialises in helping our clients plan for retirement. If you would like to learn more about the points discussed within this article request a consultation today.
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