Can’t afford to retire? Discover 6 clever ways to boost your pension

Can’t afford to retire? Discover 6 clever ways to boost your pension

UK-based price comparison website Money is offering what many would consider to be a dream job. It requires you to play games, watch TikTok and stream movies all day long.

While you may think it will go to someone in their teens or 20s, you’d be wrong, because the only people who should apply are pensioners. As such, it might be the perfect job for 1 million British workers that Canada Life claims do not intend to retire.

Research by the pension provider reveals that 23% of people want to continue working beyond their State Pension Age as they like the routine. One in five said they’ll continue as they like their job.

More worryingly though, 43% of people felt their pension pot is too small to completely stop working when they retire. If that’s you, there could be ways to boost your pension so that you can put your feet up in retirement. Read on to discover more.

Check the value of your pension pot

Before you do anything, talk to a financial planner to confirm the value of your pension pot and whether it will support the lifestyle you want in retirement. You might be pleasantly surprised!

If your pension won’t support it, the planner could provide options that could help you increase your pension pot to a level that allows you to finish work.

Here are six of your options.

1. Increase your pension contributions

Increasing contributions could boost your retirement fund by a surprising amount because of compounding. This is where you enjoy growth on the growth your pension has already made.

In addition, because of the tax relief you typically receive on contributions, every £100 you put into your retirement fund actually costs you £80 if you’re a basic-rate taxpayer. If you’re a higher-rate taxpayer it costs £60, and an additional-rate taxpayer pays £55.

In 2021/22, you receive tax relief on contributions up to the value of your earnings, or £40,000, whichever is lower. Higher earners may have a lower Annual Allowance, so check with a financial planner.

It may also be worth considering your workplace pension scheme first. This is because your employer might match your increased contributions, providing an additional lift.

2. Reassess your standard of living in retirement

If increasing your contributions is not an option, you may want to consider adjusting your lifestyle in retirement. A financial planner could help you understand where savings could be made, and which elements of your planned lifestyle you’d be happy to compromise on.

For example, you may by happy with one holiday abroad instead of two, or changing the car every five years instead of three.

3. Locate lost pensions

According to the Telegraph, £19.4 million worth of UK pensions are still waiting to be claimed because they’ve been lost. A financial planner can help you track any lost pensions that you have and provide options once you find them.

This could include consolidating them with existing pension pots, as this might boost potential growth and reduce fees.

Always speak to a financial planner, as consolidation can carry risks and you could lose benefits on existing pensions you probably would rather keep, such as a guaranteed annuity rate.

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

While too much risk might be bad for your pension, so too could not enough. This is because growth typically comes from the higher-risk funds within your retirement fund, and not having enough risk could stifle it.

As such, you may want to consider increasing the level of risk in your pension, as it could help increase your retirement fund to where it needs to be for you to stop working.

Always speak with a financial planner before changing your level of risk, as they will confirm the level that’s right for you and ensure you understand the implications of doing so.

5. Use other investments if you have them

If you have other investments or savings, including them in your retirement strategy could allow you to finish work.

If you have ISAs, for example, you could draw money from them and typically you won’t be liable to Income Tax or Capital Gains Tax. This could boost your pension income to a level that allows you to stop working, or you could instead live off your ISAs for a period.

The latter could allow you to defer drawing on your pension, which means it will remain invested and exposed to potential growth. This could then boost it to a level that provides an adequate income should you stop work.

6. Consider carry forward if you have a lump sum to use

If you have recently received a lump sum, maybe because of an inheritance, you could use it to boost your pension. If you use “carry forward”, you might be able to use unspent Annual Allowance from the previous three years to make larger contributions and still receive tax relief.

As strict rules apply to carry forward, speak with a financial planner to ensure it’s right for you, and so you don’t accidentally breach tax regulations.

Get in touch

As you can see, if you are concerned your pension will not be enough for you to finish work, there are options you could consider. If you would like to discuss these with us, or have questions about your retirement strategy or wider wealth, please contact us by calling 0800 434 6337. We will be happy to help.

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. The fund value may fluctuate and can go down, 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, tax legislation and regulation, which are subject to change in the future.