One thing that never ceases to amaze me is the number of smart people in the UK who are unaware of some of the fantastic saving and investing products that are available these days. The number of people who take a ‘light’ approach to wealth management is quite staggering.
For example, plenty of people I know are able to save money regularly. Yet that money is often just left in a cash savings account earning 1% and losing purchasing power to inflation over time. Why? Well, often these people simply don’t know anything about the financial products that could help them boost their retirement savings. For instance, they have no idea that they could be potentially pocketing £1,000 for free from the government every year through the Lifetime ISA. So, their money just sits in a cash savings account wasting away. Given that 44% of all ISA money saved at the end of the last financial year was sitting in Cash ISAs, I’d say this scenario is quite common.
So, what are some of these easy ways to boost your retirement savings I’m referring to?
Lifetime ISA bonuses
I’ll start with the Lifetime ISA, which I mentioned above.
Now, this tax-efficient savings account is not for everyone. For starters, you can only open one if you’re aged between 18 and 40. Second, once you put money into this ISA, you can’t touch it (without harsh penalties) until you either turn 60, or buy your first property.
However, if you do qualify for it and you’re happy with these restrictions, then it certainly could be worth a closer look, as for every pound you contribute up to £4,000 per year before age 50, the government will contribute an extra 25p for you. Put in £100, and the government will add £25. Put in the full £4,000 allowance, and you’ll pocket £1,000 for free.
In my view, that’s a sweet deal. If you’re serious about saving for retirement, the Lifetime ISA could be a great way to boost your savings.
SIPP tax relief
The other brilliant ‘bonus money’ offer to consider if you’re interested in boosting your retirement savings is the tax relief offered by the SIPP (Self Invested Personal Pension) account. This is a government-approved personal pension scheme which is also tax efficient.
The way this works is that if you make a contribution into a SIPP, the government will provide you with a top-up that is equivalent to the tax you already paid on that money. So, the tax relief offered will depend on your personal tax rate. For example, if you’re a basic-rate taxpayer who pays 20% tax, and you pay £800 into a SIPP, the government will add in another £200 for you. If you’re a higher-rate taxpayer you can claim even more tax relief.
Now, be aware that you can’t touch money in a SIPP until you turn 55 and at this age, you can only take 25% of your savings tax-free (additional withdrawals will be added to your income and taxed at your normal rate). So like the Lifetime ISA, there are restrictions here. Yet overall, the SIPP is a highly effective retirement savings vehicle. If you’re serious about boosting your retirement savings, it could be worth a closer look.
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