Increase your savings
- If you have spare income, putting it into a pension is one of the most tax-efficient ways of investing it.
- Any extra income you save into a pension will benefit from tax relief. This either means that you save tax upfront, or some extra money goes into your pension and you may be able to claim back some tax as well.
- Do you have access to a workplace scheme that your employer contributes to? If so, depending on the scheme rules, if you boost your contributions your employer might boost theirs too.
Make sure you claim all your tax relief
- Are you a higher rate taxpayer making pension contributions to a workplace or personal pension that operates on a ‘relief at source basis’? If so, basic rate tax relief of 20% of your gross contribution is claimed from the government and added to your pension.
- You will need to claim any higher rate tax relief on your self-assessment tax return. To claim, visit the HMRC website.
- If you’re a higher rate taxpayer and aren’t sure if you’re getting higher rate tax relief, check with your pension provider.
- This extra tax relief might allow you to benefit from even bigger pension contributions.
Review the way your pension pot is invested
- If you have a defined contribution personal or workplace pension, you get to choose how your pension pot is invested.
- These funds will be weighted differently between various types of assets, which offer different levels of risk and potential return.
- Generally, you can afford to take more risk when you’re young, and less as you get older.
- The longer your money will be invested, the more scope you’ll have to deal with investment performance going up and down over time.
- Transferring a personal pension into a self-invested personal pension (SIPP) can give you a wider range of investment options to choose from.
- If you have a workplace defined benefit pension, you don’t decide how your fund is invested. It’s up to your employer to generate the investment returns to pay for the pension income you’re entitled to.
Review the charges deducted from your savings
- All pension providers will charge for managing your pot and investing your money.
- An annual charge of 1.5% a year could have eaten away a quarter of your pension pot after 35 years.
- An annual charge of 0.5% would have reduced your pension pot by only 1/10th over the same period.
- You don’t need to worry about this if you’re in a defined benefit scheme.
Consider bringing pension pots together
- If you have several pension pots, there are potential advantages if you combine them into one.
- You can keep track of, and manage, your pension savings more easily
- You might save money if you can move from a higher-cost scheme to a lower-cost one
- More choice of investments.
