Boosting your pension
If you want to increase your retirement income, you'll need to boost your pension. We can guide you through some of the ways to do it.
Overview
You’ve set up your pension and you pay into it regularly. Here’s how to make it work harder for you and increase your retirement income.
Boosting your pension isn’t just about increasing your regular monthly payments or paying in a lump sum when you can. You can also change your investments, consolidate all your pensions in one place or even change your retirement date to give your fund more time to grow. Bear in mind, though, that investments can fall as well as rise, and you might get back less than you invest.
A few smart choices now could see your pension buy you a much higher level of income when you retire – we’ll take you through the main options.
Top it up whenever you can
Don’t let inertia rule once you’ve set up your pension. You should actively look for opportunities to add to your pot:
- Flex your payments
Pensions are flexible so you can adjust the amount you pay in. You can put in more when you can afford it and easily drop back to your normal level when you can’t.
- Invest a lump sum
Any money you invest in your pension now has more time to grow than money you invest later. This can make building your pension much easier. Because of this, if you receive a windfall such as a work bonus or an inheritance, consider investing it in your pension.
- Regularly increase your pension payments
You can really boost your pension by increasing the amount you pay in each year by, say, 3-5%. This could help keep your payments in line with inflation. Think about a larger increase if you receive a pay rise.
- Use your spare cash
If you’ve just paid off a loan or cleared a credit card debt, you’ll have some extra money each month. Paying that amount into your pension (before you’ve got used to spending it) is a painless way of increasing how much you invest.
Remember:
Pensions are the most tax efficient way to save for retirement as tax relief boosts the money you pay in and helps it grow faster. Of course, tax rules can change and the tax relief you receive depends on your individual circumstances. But currently as an example, if you increase your monthly payments from £200 to £250 a month, the amount the taxman pays in increases from £600 a year to £800.
Take more control
The amount you pay into your pension affects your lifestyle in retirement so take control and make sure today’s pension investments buy you the best possible lifestyle.
- Become familiar with your plan
You can manage your Standard Life pension online and see how your pension is performing. It’s easy to do and will give you much more control over your pension planning. Our planning tools show you how much your pension could be worth when you retire and the impact of paying in more. It’s easy to do and will give you much more control over your pension planning.
Pension Planner tool
- Adjust your risk levels
You might be happy to take more risk when you start a pension but become more cautious as you approach retirement (as your investments have less time to recover from any falls in the market). So make sure you regularly check that your investments match your current attitude to risk - find out more about risk and reward
It’s easy to switch if you think different funds might be more suitable for your risk levels and objectives - find out more about how to pick funds
- Consolidate your pensions
Having all your pensions in the same pot has a number of advantages. For a start, it’s easier to manage. You have one set of policy documents; one annual statement with one valuation; just one point of contact for queries and one direct debit if you are combining different regular payments. Plus, you’ll only pay one set of charges.
- Change your retirement date
Whether you’ve got five years to go or 35 years, when you retire and take your pension benefits can affect the amount you’ll receive. Decide to leave it later and your pension fund will be invested for longer, potentially allowing it to grow more.
What to remember
Whatever you do to boost your pension there are a few key points you should bear in mind when making decisions. These are:
- You 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. And at the same time that you save towards your pension, try and build up an emergency fund in an easy access savings account to cover any unexpected bills and short-term financial plans.
- Higher and additional rate taxpayers get extra tax relief
This isn’t automatically added to your pension and you’ll need to claim back the additional relief through your tax return. So, if you’re a higher rate taxpayer, for every £80 you pay in, the taxman pays in £20 to your pension and reduces the tax you pay overall by another £20. And if you’re an additional rate taxpayer, your tax will be reduced by £30 (subject to the amount you earn).
- Check before you transfer pensions
It’s easier and potentially more cost-effective to have all your pensions in the same pot but there may be penalties if you transfer schemes. You could lose benefits, especially on occupational schemes, and there may be costs involved. If you’re unsure, you can contact Standard Life Direct on 0845 272 8810 or speak to your financial adviser. Standard Life Direct is provided by Standard Life Client Management which advises on, and sells products from, subsidiaries of Standard Life plc and some external providers.
The information provided is for explanation purposes only. Investments can rise and fall and you could get back less than you invested. Please remember, tax relief on pensions may change. Its value depends on your individual circumstances.
