Boost your pension
Your pension wake-up call
Paying more into your pension may not necessarily be top of your to do list. It’s tempting to think it’s something you need to worry about in the future. If you’re relying solely on your pension to fund your retirement income, are you confident you’re saving enough now before it’s too late?
Small changes can lead to big results
By cutting out a few small things from your lifestyle, such as takeaway coffee or unused subscriptions, you could free up money for your pension.
If you’ve just paid off a loan or credit card, why not put that extra money into your pension each month before you miss it?
Pensions are a tax efficient way to save for retirement as tax relief boosts the money you pay in and helps your fund grow. The taxman adds £1 for every £4 you contribute to your pension if you’re a basic rate taxpayer.
Take a look at how it can really add up
|You pay each month||The taxman adds||Monthly pension boost||Annual pension boost|
What’s more, if you’re a higher rate taxpayer you’ll also get further tax benefits through your tax return.
The value of tax relief could change depending on your individual circumstances. The figures above are based on our understanding of tax rules in April 2014 and they may change in the future.
You may not be aware exactly how flexible your pension is. It’s designed to adapt to your changing needs. You can also manage it online, just like a bank account.
- Change your monthly payment
You can adjust the monthly amount you pay in by logging into your plan online or with a phone call. You can choose to pay more when you can afford it or reduce it when you can’t.
- Make a one-off payment
You can make single payments into your pension. If you receive a windfall such as a work bonus or an inheritance, you should consider investing it in your pension.
- Keep your payments on track
You can really boost your pension by choosing to automatically increase your pension payments each year, say by 3-5%. This keeps your payments in line with inflation without you having to worry about it. You could even consider a larger increase if you receive a pay rise.
- Change your retirement date
The longer your pension fund is invested, the more chance it has to grow. You can change your retirement date at any time to suit your needs. As with any investment, the value of funds can go up or down and may be worth less than you paid in.
- Manage your investments
You may be happy to take more risk when you start a pension but become more cautious as you approach retirement. You can review your pension investment choice at any time by logging into your plan online.
Need to think again?
It's easy to find reasons to put off paying more into your pension. Some of the reasons below may sound all too familiar, click on them to see if you need to reconsider your approach.
The Government will look after me
The Government is reviewing the state pension system and plans to introduce a universal credit of £142 a week at today's prices.
You may have paid off your mortgage and have no child care costs by the time you retire. But are you confident you can manage council tax, utility bills, insurance and groceries on just £7,384 a year? And that’s before you count up the cost of broadband, mobile phones or any leisure activities you enjoy.
My house is my pension
Bricks and mortar can certainly be part of your retirement plan but won't replace the benefits of a pension.
As with any investment, there's no guarantee that house prices will continue to increase at the same rate - or at all.
If you need to release some of the equity in your home, you may have to downsize. And there’s no guarantees you'll get a smaller, cheaper home in the area you want that suits your retirement needs.
You'll need to sell up and have other plans in place if you want to access the full value of your home.
I'm waiting for my inheritance
Relying on inheritance from a relative to fund your retirement could prove a very risky strategy.
Your relative may need to fund their long-term care costs and there’s also the impact of any taxation to consider.
Timing is also key as there’s no guarantee you’ll have access to the money when you need it.
I'm hoping I’ll have enough
As a general rule your final pension pot should be around 20 times the annual income you’d like in retirement. An £80,000 pot could give you an annual income of around £4,000.
The more you save now into a pension, the more the Government will add in tax relief.
I need to keep control of my savings
It could be a good plan to save for the future with an ISA.
But you need to weigh this up against the valuable tax benefits you get from paying more into your pension. For every £80 you pay into your pension you’ll receive another £20 from the taxman. If you’re a higher or additional rate taxpayer, you may be entitled to an additional 20% or 25% tax relief.
I can't commit to paying for long periods of time
Your pension is flexible. You can usually start, stop, increase or decrease at any time with just one call. Or you can just return and complete the simple enclosed form today, and let us do the rest.
I'll start later
The longer you put it off the more you'll have to play catch up and make bigger sacrifices to fund the retirement you want. Paying more in now will give your retirement fund a better chance to grow over the years.
I'm feeling lucky!
You may hope one day all your problems will be solved by winning the Lottery. You may need to weigh up the odds though, as you have approximately 1 in 14 million chance of your 6 numbers coming up - according to the UK National Lottery website.
What to remember
Whatever you do to boost your pension, there’s a few key points you should bear in mind when making decisions:
- You normally can’t take your money out until you reach the age of 55. Don’t let this put you off – think of all the top-ups you’ll receive from the taxman over the years that will be paid into your pension.
- If you exchange salary in return for a payment from your employer to your plan, you don’t get tax relief on that payment. But you do save tax on the salary you have sacrificed.
- If you’re a higher or additional rate tax payer contributing £80 into your pension, your tax will be reduced by a further £20 or £25 as appropriate (subject to the amount you earn).
- The information provided is for explanation purposes only. As with any investment the value of your fund can go up or down and may be worth less than what was paid in. Laws and tax rules may change in the future. The information here is based on our understanding in April 2014. Your personal circumstances also have an impact on tax treatment.