If you’re finding yourself close toand have concerns as to your total savings, there may still be time to boost your pot and retirement income. There are basically two ways of going about this – one being to physically add more money into your pension pot, the other being to delay the date on which you’ll begin accessing your pension funds.
In the case of the first option, this essentially means increasing the amount of money you pay into your pension fund, either in the form of a workplace pension or your own personal contributions. Particularly if you are a higher-rate taxpayer, this can be a highly beneficial and rewarding approach. By adding an extra £80 to your pension pot, a further £20 would be added in the form of tax relief to make a total £100 contribution. In addition, £20 can be claimed in higher-rate tax relief, which effectively means that the £100 contribution would cost just £60.
Of course, limits apply in terms of how much can be paid into a pension pot each year and qualify for tax relief, so be sure to check the finer details before going ahead.
As for the second of the two options, it’s technically possible to combine the two and give yourself extra time to put extra money in your pension pot as and when possible. To push back the date upon which you will begin accessing your retirement income can help increase your total pot in multiple ways.
For example, the longer you leave your pension pot untouched, the longer you have to continue making contributions. The more contributions you make, the more may be added on in terms of tax relief (see above) adding up to a significant boost to your pension pot. However, delaying your pension means fully taking into account any potential risks that could lead to your investments falling in value, by the time you access your funds.
In addition, there’s also the way in which annuity rates continue to increase as you get older. This means that if you are thinking of using your pension funds to purchase an annuity, waiting until a later date could mean receiving a higher income. Once again though, this is subject to overall annuity rates not falling in the meantime.
If you have any intention of delaying your pension at any time at all, it’s important to first seek independent financial advice. Mapping out the years between now and when you access your funds is crucial, as making the wrong decision could open you up to the kinds of risks that could have a negative effect on your retirement savings and income.
You may also want to consider whether or not you will have made sufficient National Insurance contributions by the time you reach the date of your retirement. You can request a statement to find out whether or not this is the case, after which the necessary action can be taken accordingly if required.
For more information, get in touch with the Haven IFA team today.