This page is quite old hence its rather spartan appearance.
Why not check out our Latest Stories page for our newest articles or search our site for anything.
I had some fun with a leading government official when, at a financial conference last November, I grilled Ivan Lewis MP, Economic Secretary to the Treasury. I congratulated Mr Lewis and his administration for three positive achievements: At this point, Mr Lewis must have assumed that I was one of his biggest supporters. Alas, I then turned into a critic, rebuking his administration for: These criticisms must have stunned Mr Lewis, because he fell off the stage shortly afterwards! In fairness, government policy could do little to stem the first two problems, which were largely fuelled by the housing boom. However, Gordon Brown has to shoulder some of the blame for the collapse in confidence in pensions, which has created problems that will last for generations. Anyway, forget about the government keeping you in your old age, because, as Yes (Prime) Minister showed only too well, politicians and civil servants can't be relied upon to put the public's well-being first. Frankly, the only person who can build a better retirement for you is you. To help you on your way, here are five techniques which you can use to boost your pension pot: 1. Raise your contributions The simple rule with pensions is: the more you put in, the more you get out, all other things being equal. Whether you belong to a company scheme, or contribute to your own personal or Stakeholder pension, dropping more of your income into your scheme usually makes good sense. What's more, there is now no limit on how much you can put into pensions, although you'll only get tax relief on up to 100% of your gross (pre-tax) salary, up to a limit of £215,000 a year. As I have about nine empty years in my pension CV, I plan to put about a fifth of my pre-tax income into pensions for a while. I can't really afford to, but I can't afford not to, either! 2. Reduce your charges If you have an existing personal pension, you could be paying ultra-high charges to your provider, especially if you set up your plan before 2001, when low-cost Stakeholder pensions were introduced. Even if you face transfer penalties for switching your existing pot and future contributions to a new-generation, low-cost pension plan, it could pay off in spades. A pension transfer could knock, say, 1% a year off your charges, which could boost your final pot by thousands of pounds. 3. Sacrifice a few pay rises or bonuses Recently I got into the good habit of giving up my pay rises in order to lift my pension contributions. Rather than have, say, an extra £100 a month in my hand after tax, I increased my monthly contributions to my Stakeholder pension by a pre-tax £167. Of course, this meant that my pay didn't rise over the year, but at least I knew that additional money was winging its way towards my future financial security. My wife uses a slightly different trick: in order to reduce her tax bill and boost her pension pot, she puts a large slice of her annual bonus into her pension. As a 40% taxpayer, she'd rather see £5,000 go into her pension pot than receive £3,000 in her hand, so she's happy to redirect her bonus in this way. 4. Retire later Although the majority of workers dream about retiring early, for most of us, this is nothing more than a dream. To retire on a pre-tax income of £20,000 a year, you need a pension pot worth around £400,000 or so. In reality, the average personal pension pot is about a tenth of this size, so the majority of us can look forward to a retirement of striving to make ends meet. On the other hand, retiring after your normal retirement age has a number of attractions. You continue to earn money, so your standard of living doesn't drop. You defer your retirement by a few years, so you need less money to fund a shortened retirement. Also, you don't pay National Insurance Contributions after reaching State retirement age, so your take-home pay leaps by about a tenth, too. Personally, I really enjoy writing about personal finance, so I don't plan to give up work at all -- although I don't plan to work until I reach a hundred, as this American worker did! 5. Shop around for annuities With a pension, you use your income to create capital (a large pot of cash or other assets). The flipside of this is an annuity, which turns the capital in your pension fund into an income which lasts until you die. Until April 2006, you were forced to turn your pension pot into an annuity before you turned 75, but this requirement has now been relaxed, as I explained in point six of this article. However, if you do decide to buy an annuity, you don't have to buy it from your existing pension provider. Indeed, you could earn up to a third more by exercising your "open market option" and asking a specialist financial adviser to search the whole market for you. Experts in this field include www.annuityadvisor.co.uk, www.annuity-bureau.co.uk, www.annuitydirect.co.uk, www.hlannuity.co.uk and www.justretirement.com. Here's to higher pensions and happier retirement all round! More: Visit our Pensions centre | Find out about tax-free savings and investments today!
