How much money you want, or need, for your retirement depends upon the lifestyle you want to enjoy when you stop working. Everyone will have different financial requirements when they retire. However, everyone is likely to share the desire to have as much money as possible to retire on.
How much retirement funds you can amass depends upon the financial preparations you have made. The age you plan on retiring will also influence how much money you can get when you retire. Pensions are the most common method of funding retirement, so you will want your pensions to be as healthy as possible. Read on to discover five ways to maximise your pension funds. Also, learn about the main factors that will influence the age at which you retire.
5 Pension Maximising Tips
Tip 1. Start Saving Immediately. When it comes to your pension, now is the best time to get started saving. The longer you have to let your pension benefit from compound interest, the more significant its growth will be.
Tip 2. Make Regular Top-Ups. Making regular top-up payments to your pension will give your pot a significant boost. Any pension payments you make (up to a certain amount) are subject to tax relief. Therefore, some of the money you invest is money that usually would have gone to the government.
Tip 3. Stay in Your Workplace Pension. If you are over twenty-two and employed, you’ll be enrolled in a workplace pension. As of April 2019, employees pay 5% of their pre-tax salary into a workplace pension. These contributions are topped up with another 3% from your employer. Opting out will mean you miss out on what is effectively free money from your boss.
Tip 4. Regularly Check Your Pension’s Progress. You should not simply invest in your pension fund blindly but periodically check its progress to ensure it remains tailored to your needs. On checking it, you might discover that you are paying high management charges or that your pension is not performing as it should be. Conducting regular checks of your pension will enable you to take action to rectify any potential shortfalls.
Tip 5. Pay into Your Pension a Bit Longer. Continuing to work for a few more years than you had planned and continuing to make pension contributions could significantly increase your pension’s size. The longer it is invested, the more opportunity it has to grow from compound interest, and you will continue to enjoy tax exemption on your contributions.
Check Out These Three Factors That Affect Your Retirement Age
- People Are Generally Working Longer. Over the past decade, the average retirement age has risen considerably. Today, almost twice as many working women aged 60-64, and around 14.3% more men. For men aged between 65-69, there are now more than 25% still in employment compared to only 15% a decade ago.
- Rising State Pension Qualification Age. The age at which you can receive the state pension has been rising in recent years, and it currently sits at sixty-five. This age is the same for both men and women, the first time it has been equal since the state pension was introduced more than 100 years ago. Despite being able to draw their pensions at sixty-five, many women (49.6%) do not plan on retiring until they’re sixty-seven.
Currently, the full state pension is £179.60 per week, and you need to have made thirty-five years’ worth of National Insurance contributions to receive this amount. If the state pension is your only source of income for your retirement, you should consider whether this will be enough to sustain the lifestyle you want when you retire.
- Pension Flexibility. In 2015, the government passed legislation giving pension holders more freedom over their pension funds. When you reach fifty-five, you can now choose to access some or all of your pension as lump sums. The first lump sum, up to 25% of the total value of your pot, can be taken tax-free, but the remaining lump sums will be taxed. You can also choose to leave some or all of your funds invested to provide income when you retire.