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Retirement saving: one trick I’m using to boost my pension

For most people, the thought of saving for retirement is daunting. Working out how much you should be saving and how much you’ll be entitled to when you decide to leave the workforce can seem like a huge challenge. 

However, it doesn’t have to be. There are many different tools out there you can use to structure your pension savings with minimal effort, and today I’m going to explain the one trick I’m using to boost my own pension savings. 

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Making a plan

Only a few years ago, the idea of regular investing was relatively foreign to most investors, but in recent years, there has been a dramatic increase in the number of investment platforms that offer a regular investing facility. By pooling investors’ orders together, some platforms allow you to invest with as little as £50 a month, with minimal costs, and I’m making the most of this to boost my savings. 

I have set up a direct debit on my bank account to pay a certain percentage of my income into my SIPP, which is then invested in a low-cost index tracker fund. This whole process is automated with no input whatsoever required on my behalf.

The great thing about using a SIPP for investing is that any money paid in is subject to tax relief. For example, for every £100 I contribute, I receive a £20 top up from the government, boosting my retirement funds further. 

Pound-cost averaging 

The other benefit of using this regular investment plan is that it allows me to profit from pound-cost averaging. This technique reduces my exposure to falling markets because, by investing a lump sum at regular intervals, more shares are purchased when share prices are low and fewer shares are purchased when prices are high.

Unfortunately, as well as cushioning against losses, this strategy also dampens gains in a rising market. However, as many studies have shown it is almost impossible for investors to consistently time markets correctly (i.e. buying at the bottom and selling at the top), I’d rather put my money behind a strategy that takes the risk out of market-timing altogether. 

Slow and steady 

The combination of the regular investment plan, as well as the pound-cost averaging will, in my opinion, help me build a solid retirement cushion over the next few decades.

Key to my investing plan is the investments I’m buying. I’m strictly limiting my regular investment to a low-cost index tracker fund as data show this is the best way to grow wealth with minimal effort over the long term. A tracker fund also fits in nicely into my pound-cost averaging strategy because I don’t need to worry about whether or not the index is overvalued at any particular time. All I need to do is set, and forget. 

The bottom line 

So, that is the trick I’m using to boost my pension savings. An automated regular investment plan coupled with pound-cost averaging into an index tracker fund will help me build my pension without having to spend hours worrying about it every month. I highly recommend adopting this low-effort strategy. 

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Rupert Hargreaves owns no share mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.