4 Boosting your private pension
If your forecast pension is less than you need for the retirement lifestyle you have in mind now is the time to take action.
First make sure you’ve got details of all the pension schemes you’ve been a member of. If you believe you are missing details of a pension scheme where you have been a member, Money Helper’s pension tracing service can help.
Boosting pension contributions
If your projected pension is insufficient one obvious action is to increase your pension contributions – and the quicker you act the more beneficial this will be in the long run. The great news is that pension contributions - up to a limit (of £40,000 in 2021/22) - attract income tax relief up to your top rate. So the government adds 40p for every 60p you contribute if you are a higher-rate taxpayer. Basic rate taxpayers get 20p for every 80p contributed.
If you have taken a career break or plan to, perhaps if you’re bringing up young children, this will have an impact on your pension savings. Typically the average pension savings of women are lower than their male counterparts as they often earn less and are more likely to have had gaps in their pension contributions. Pressures on the household budget may limit the scope for additional contributions to boost your pension – perhaps until your children have left home and the mortgage is paid off. However, note that a working partner can pay into the pension pot of the person who is doing the caring.
Really every opportunity to add to your pension should be taken as early as possible and it’s never too late to add to your pension pot.
Managing your pension pot
Usually with defined contribution schemes you can choose the fund(s) you want to invest in. This enables you to help manage the investment risk your pension pot is exposed to.
You should, if you wish, be able to make changes to the funds you’re invested in. However if you are thinking of doing so we recommend that you take financial advice to make sure the changes are right for you.
If you don’t make a choice (and 95% don’t) the scheme will put your money into a default fund, which is typically designed to work for the majority of scheme members and is not tailored specifically to you.
Also, is your expected retirement age on your pension plan correct? You can update this if needed.
Consolidating your pension savings
If you have more than one private pension scheme it might make sense to consolidate them into one plan. You should talk to a pensions adviser before making any moves and get the details on the impact on your pension benefits and on the charges involved.