Are you ready for your retirement? Whether drawing your pension is decades away or in just a few years time, keeping tabs on how your pension assets are performing is essential if you want to make sure they’re on track to provide you with enough to live on once you’ve given up work.
Here are some tips that can save you tax and maximise your returns so that you can get the best from your pension savings in the future.
Check What Pensions You Have
Over your working history you’ll have accrued various different entitlements in different ways, including the state pension funded by your National Insurance contributions and pensions set up by your employers. These may have been ‘final salary’ pension plans or ‘defined contribution’ plans. You can check your state pension forecast via the government website, and with their free Pension Tracing Service, you can contact previous employers to identify whether you have any additional pension entitlements.
Improve Your Contributions
Now that the workplace pension is a legal requirement, all employers must contribute at least one per cent of your earnings into a pension. However, if you contribute more, firms will often match your contributions up to a capped limit, usually five per cent. If you’re a younger earner, it’s worth keeping in mind that according to the Pensions Policy Institute, if you save 14 per cent of your earnings you’ll have a two in three chance of retiring with about two-thirds of your salary.
Make Sure You’re Not Paying Unnecessary Tax
Currently, when you make contributions to your pension, your pension company will automatically claim tax relief of 20 per cent. However, higher-rate tax payers are entitled to tax relief up to their highest rate of income tax, but they can only receive the difference if they claim it via their tax returns.
Make Sure Your Investments Work for Your Retirement
Since the introduction of greater pension freedoms in 2016 allowing over 55s to do what they wish with their pension funds, there is a greater need for advice. Pension advisers like http://www.hensoncrisp.com/news-retirement-planning-advice.php can assist retirees in making the decision of withdrawing a lump sum, entering into ‘drawdown’ or buying an annuity – or even a combination of the three.
The decision that you make will have a permanent effect on your income for the rest of your retirement, so it’s important to understand the pros and cons of each choice and which will work best for your retirement plans.
And if you’re not ready for retirement yet, then a professional adviser can provide guidance on managing your savings as they continue to grow. They can assess whether your savings are with the pension provider that’s right for you or whether you would benefit from transferring some of your pensions and grouping them together under a single scheme.
Whichever stage you are at in life, it’s always the right time to take a serious look at your pension assets and make sure you’re making your savings work at their maximum.