10 powerful ways to boost your pension and ensure it lasts as long as you do

10 powerful ways to boost your pension and ensure it lasts as long as you do

According to the Office for National Statistics, men approaching the age of 65 are likely to live for a further 20 years. If you’re a female aged 65, you’re likely to live for 22 more years.

Great news, you might be thinking – two decades of holidays and good times with the family. While you may be able to fund this lifestyle immediately, the question might be whether you can fund it for the rest of your life?

According to Professional Adviser, 43% of retirees are taking too much income from their pension pot and could end up depleting it. This could cause a serious financial headache later on in life.

For these reasons, it can benefit you to speak with a financial planner, as they can confirm how much income your retirement fund could provide without putting its longevity at risk. But, what happens if you’re told your pension won’t support your lifestyle in the long term?

Discover 10 clever ways to help boost your pension to get the retirement you want.

1. Increase pension contributions

Thanks to compound growth, increasing your pension contributions could significantly boost your retirement fund. This is because compound returns allow you to enjoy growth on the growth your pension has already made.

Furthermore, contributions typically receive tax relief.  So, if you’re basic-rate taxpayer, every £100 you add to your pension only costs you £80. If you’re a higher-rate taxpayer, it costs £60.

The amount of contributions that receive tax relief is limited to your Annual Allowance. In 2021/22, this is the amount you earn, or £40,000, whichever is lower.

Additional-rate taxpayers pay just £55 for every £100 you contribute to your pension, although under Annual Allowance tapering rules, your allowance could drop to £4,000 (2021/22) if you’re a very high earner. Speak with a financial planner to confirm which allowances apply to you.

2. Find lost pensions

According to the Telegraph, an estimated 1.6 million pension pots have not been claimed in the UK because they’re “lost”. Finding a lost pension could provide your retirement fund with the boost it needs for you to enjoy the lifestyle you want without the risk of running out of money.

3. Reassess your standard of living in retirement

Another way to ensure the longevity of your pension pot is to reduce your outgoings. This is something a financial planner could help you with, as they could suggest ways to reduce the amount you spend in retirement.

For example, you’ll probably be prepared to take fewer holidays if it means your pension is more likely to last as long as you do.

4. Adjust the level of risk your pension’s exposed to

As growth typically comes from the higher-risk funds within your pension pot, increasing its exposure to risk could increase its growth potential. Never do this without speaking to a financial planner first, as they will confirm whether it’s right for you.

5. Retire later or work part-time

If your pension will not support the lifestyle you want, you may decide to continue working either full- or part-time. This allows you to make more pension contributions and means your retirement fund will not need to last as long as you’re retiring later.

If you do this, be careful of the Money Purchase Annual Allowance (MPAA). If you begin to draw your pension flexibly, the MPAA could reduce your Annual Allowance to just £4,000, significantly reducing the amount of tax relief you receive on contributions.

6. Make sure you claim back all your pension relief

Data published by Pension Bee reveals that many higher-rate taxpayers do not claim the full tax relief on their pension contributions. This means an estimated £810 million was not claimed in 2018/19.

If you pay tax at 40% or 45%, you could be depriving your retirement fund of significant amounts of money, which could boost its value.

7. Use carry forward

If you have recently received a lump sum, maybe as an inheritance, you could put it into your pension. If you use “carry forward”, you may be able to make contributions above the Annual Allowance and still receive tax relief.

This is because it allows you to use unspent Annual Allowance from the previous three years.

8. Check your State Pension forecast

For many, the State Pension is fundamental to retirement income. Checking you’re eligible for a full pension which, in 2021/22, is £9,627.80 a year, ensures there won’t be an unexpected shortfall when you retire.

If you’re not entitled to a full State Pension, a financial planner can help you top it up using National Insurance contributions (NICs). For a State Pension forecast, visit the government website and enter your details.

9. Reduce the charges on your pension

Reducing the costs associated with your pension pots could help increase growth potential, as it reduces shrinkage because of fees. A financial planner could provide more cost-effective options and confirm whether they’re right for you.

10. Consider consolidating your pensions

Merging your pensions to create one larger pot may help boost growth potential and reduce fees. Always speak to a financial planner to ensure it’s right for you, and ensure you don’t lose benefits offered by your existing pension you’d probably rather keep, such as guaranteed annuity rates.

Get in touch

Financial planners use sophisticated income modelling software that can confirm the level of income you can take in retirement without depleting your fund. This provides the peace of mind that you can enjoy the lifestyle you want without the risk of a future financial nightmare.

Alternatively, they can provide options that could allow you to boost your pension pot and standard of living when you finish work.

If you would like to discuss your pension, the income it could generate and its longevity, please call us on 0800 434 6337.

Please note:

This article is for information only. Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The value of your investments (and any income from them) can go down as well as up, which would have an impact on the level of pension benefits available.

Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances. Levels, bases of and reliefs from taxation may change in subsequent Finance Acts.