Let’s face it, size often matters. Indeed, the bigger your retirement fund, the more comfortable your post-working life will be. Of course, one person’s comfortable lifestyle is someone else’s luxury. Therefore, how much you need for your retirement depends on what you want to do. However, broadly speaking, you want as much as possible.
Most of your retirement income is likely to come from a pension. Maximising the amount within your pension pot is crucial. Therefore, read on to discover five pension maximising steps. We will also cover a few factors that will influence when you can retire. Planning for your long term future is crucial; when considering your pension, take on expert advice from a specialist such as Portafina.
Five Pension-Maximising Steps
Step 1. Start saving – now!
The sooner you start saving into a pension plan, the more time it has to grow. Therefore, right now is the best time to start. You will never regret starting too early, but you might do if you delay.
Step 2. Make top-up payments.
Even small regular top-up payments will significantly affect your pension pot. Remember, your contributions, regardless of the size, benefit from tax relief and compound interest growth.
Step 3. Remain within a workplace pension scheme.
Leaving a workplace pension means you might lose out on thousands of pounds every year. Thanks to auto-enrolment, you don’t have to opt into such schemes; simply remain within them. These pensions equate to 8% of your salary towards your retirement fund. The great news is that you only contribute half of this amount.
Step 4. Keep checking your pension.
You should regularly check your pension’s performance and ensure it is suitable to your changing needs. If you don’t check it, poor performance and high management costs could erode your pension funds. A regulated financial advisor can help you with checking your pension.
Step 5. Extend your pension contributions.
Extending your pension contributions means you will have more time to grow your pot. Of course, this means working for a few extra years past your anticipated pension retirement age. However, who knows when you will decide to retire? Here are a few factors which influence that.
Three factors influence when you can retire.
- Extended working lives.
Today, people are working longer than they did 20 years ago. Indeed, over 14% more men aged between 60 and 64 are still working compared to 1998. The figures for women in the same age group are even starker, with double the number in employment. The number of 65 to 69-year-old men still employed has risen by 10% in this timeframe.
- Rising State Pension qualifying age.
Currently, the state pension qualifying age for men and women is the mid-60s. This age has gradually risen for women since 2010, and it is now level with men for the first time in over 100 years. Despite qualifying for the state pension at 65, around 50% of women don’t plan to retire until 67.
The maximum State Pension benefit is £179.60 per week. Although this is an excellent supplement, you should consider if it is sufficient to support your retirement lifestyle on its own.
- Greater pension freedom.
Pension freedom regulations introduced in 2015 mean you now have greater flexibility over your pension funds. For instance, when you reach 55, you might be able to take a quarter of your pension funds as tax-free cash, depending on the type of pension. However, it would be best if you considered the implications of depleting your pension pot of too much money. It could leave you short of income when fully retired.