It’s often easier to put away savings for things we want in the short-term: a house, a car or even a small convenience. However, saving for your pension is just as important, and it’s so often neglected. You’ll thank yourself in later life when you enjoy the hard-earned pension savings you put away – but what are the best ways of doing this?
Don’t abide by a minimum contribution
You don’t have to stick to the minimum earnings in your pension. In fact, adding in a little more when you come into a bit of money, or if you find yourself with a little extra in your pocket at the end of the month could be hugely beneficial.
While there’s no minimum contribution, there is however a maximum. The cut-off is £40,000, which accounts for everything received from both you and your employer. Don’t be tempted to exceed this as you could be penalized. However, if you do go over, it’s worth noting you can use any previous unused allowance for up to three year’s beforehand.
Stay enrolled in your employer’s scheme.
There are three good reasons for staying enrolled in your employer’s pension scheme:
Your contributions will add up over time
Your employer will also add in the scheme
You will receive tax relief
When added up together, these come to 8% of your annual salary – a total not to be sniffed at. If you’re over the age of 22 and earning £10,000, you should have been automatically enrolled in your employer’s scheme, so the majority of the work will have been done for you. This is one of the easiest ways to reward yourself in later life.
Get a pension review
The fluctuation of interest rates and inflation can both affect how effective your current pension is performing. On top of this, charges and insufficient interest rates could also be weakening its growth. Hiring a regulated financial adviser, such as Portafina, will assess your pension pot to see if it is earning as much as it should be. This is why those who get their performance reviewed often earn more than those who don’t! If you’re interested in a no-obligation pension review, then click here for more details.
Don’t forget your old pension pots or NI contributions
If you’ve had more than one employer, then there’s a chance you have multiple pension pots sitting idle. These all belong to you, not your employer, and they may not be performing particularly well if they’re still using an old scheme. Be sure to retrieve details on these and put them up for review with a professional adviser. You can do this by contacting Portafina by finding them online or using their Facebook page.
In a similar vein, it’s worth checking that, as well as workplace pensions; you’ve been adding to your National Insurance contributions. You will need to have been doing this for 35 years to qualify for the full State Pension. It doesn’t have to have been for 35 years straight, but anything less than 35 years with any ‘gaps’ in your payments may stop you from receiving the full State Pension.
Be aware of tax relief
Tax relief puts a little bit of extra cash in your pocket, courtesy of the government. This is a tax break that is claimed by employers and pension providers alike to save you some money for your pension. If you are a higher or additional rate taxpayer, it is possible that you will have to via HMRC’s self-assessment form.