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Ten Ways to Increase Your Retirement Savings

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The following is for information purposes only and does not constitute financial advice. Speak to a professional, independent financial adviser on the FCA register prior to making any big financial or investment decisions.

According to the Scottish Widows’ 2018 Retirement Report around half of the UK’s workers feel that they are not saving enough for retirement.

It is difficult to say for certain how much you need in retirement in order to live comfortably. Much depends on your lifestyle and financial goals.

As a general idea, however, research publications in 2018 suggest you will need at least £260,000 to avoid most financial worries. Take that with a grain of salt – your situation might require more or less. Yet it is a useful ballpark figure to work with.

In light of this, what are some practical ways people can put away enough money for retirement – particularly those under 30? Here are ten tips to consider:

#1 Claim free pension cash

As of 6th April 2019, you will be required to contribute at least 5% of your annual salary towards your workplace pension. Your employer will also need to put in at last 3% – meaning 8% in total.

You can opt out of auto enrolment to increase your take-home pay, but we highly recommend against this. It is effectively saying no to free money from your employer.

Remember you get tax relief on your pension contributions. This effectively means that the government gives you a financial “bonus” by putting money into your pension instead of collecting it in the form of Income Tax.

#2 Increase your contributions

If you have the capacity to do so then it might be worth considering increasing your pension contributions. Perhaps you could cut back on some unnecessary spending and put in 10%, for instance. Putting more into your pension earlier on has the potential to result in a much bigger pension pot, due to the power of compound interest.

#3 Maximise your state pension

The amount of money you get from the government in retirement (the “state pension”) largely depends on how many years’ National Insurance (NI) contributions you have made.

To receive the full new State Pension (£168.60 per week in 2019-20) you will need at least 35 years of NI contributions under your belt. Make sure that you make the most of this benefit by not unwittingly falling under this threshold if you can help it.

For instance, if you have lived abroad for a long time (e.g. 10+ years) and intend to live there for longer before retiring in the UK, then you might want to consider making voluntary NI contributions whilst abroad to make sure you make up the required 35 years.

#4 Find any lost pensions

Most people now have multiple careers throughout their lifetime. It isn’t uncommon for people to move through at least ten different jobs over the course of forty years.

One consequence of this job movement is that people often leave jobs and forget about the workplace pension they built up during their prior employment.

Tracking down your lost or forgotten pensions can be a valuable way to increase the retirement savings you previously thought you had. If you need assistance with this, then please get in touch with our team here at Castlegate and we would be glad to help.

#5 Make the most of your allowances

Every year you can put up to 100% of your annual earnings tax-free towards your pension (up to a £40,000 cap). You can also save a maximum of £1.03m in your pension pot(s) in 2018-19 without it being liable to tax.

#6 Respect your tax-free lump sum

The pension freedoms allow you to withdraw up to 25% of your pension pot, tax-free, usually once you reach the age of 55. Be careful not to simply assume that it is OK to just take out the full 25% and spend it on whatever you wish. In some cases, it might make sense to keep some or all of this amount invested in order to provide a higher annual income in retirement (e.g. through income drawdown).

#7 Shop around for annuity deals

If you have been advised by an independent financial adviser that buying an annuity might be your best option in retirement for providing an income, then make sure you look around for the best deal. After all, you will be stuck with it for the rest of your life. Taking time to really find something decent could boost your retirement income by up to 40%, so it’s worth the effort.

#8 Use up unused allowances

Remember we said that you can save up to £40,000 per year towards your pension? If you have not hit this cap in any of the previous three years, then you can use these up in the current financial year.

So, if you put nothing aside in the last three years you could put up to £160,000 into your pension in one single year. Just remember that you cannot put in more than your annual income.

#9 Think about consolidation

If you manage to track down all of your pensions, then it might be worth putting them into one single private pension. This could make things much easier for you to manage when sorting through your income, and possibly even lower your costs by reducing charges.

#10 Get independent advice

Yes, independent financial advisers do come with their own set of costs. Yet it can be immensely worthwhile to get an experienced set of eyes on your pension arrangements and sift through where cost-reductions and improvements can be made.

At the very least, you will have the peace of mind that you have considered all of your available retirement options well ahead of time, using the best possible information.

If you would like to speak with an adviser here at Castlegate, then please get in touch to arrange a free, friendly and no-commitment consultation today.