Love it or loathe it right now, your pension will probably be your best friend one day. Sometimes it can be tricky to think so far in advance and make preparations that won’t pay off until years or decades away. However, some smart decisions can really boost your efforts.
With the help of the experts at Scottish Widows, I’m going to explore the world of pensions and give you some saving tips to last a lifetime.
Why you should take control of your pension now
For some of you, it might feel too soon to take complete charge of your pension. It can often be easier to let it just tick along in the background. After all, it might be years before you can even access these savings.
Taking control of your pension doesn’t mean micro-managing and taking stock every day. You can implement some strong wealth-building ideas and then just do an occasional check-up. Consider it a routine health overview, but for your retirement savings.
Because the majority of your pension funds will be invested, it’s important that you understand where your money is actually going. It’s okay to hand over the reins to professionals, but it’s worthwhile to have a grasp of the investing plan for your savings. Otherwise, you might find out one day that your pension investments do not align with your values or goals.
Tips to help you boost your pension pot
Robert Cochran, retirement expert at Scottish Widows has put together four top tips for boosting your pension pot. Let’s take a look.
1. There’s never a perfect time to start saving: now is better than never
This is something that applies to a lot of areas in life. Obviously, it may have been a good idea to learn a language or become a chess wizard from a young age, but that’s in the past now. Other than yesterday, the next best time to start something is today.
So if you’ve been a bit hesitant about putting money aside for retirement, it’s not too late to get started. And the sooner you do get the ball rolling, the easier time you’ll have with building up a decent retirement fund.
2. Don’t miss out on your ‘free’ pay rise
Some companies will actually pay more into your pension than the legal minimum. If your employer will match higher contributions from you, it’s something that you should seriously consider.
Doing this will mean slightly more saving on your part but it will also mean ‘free’ extra money from your employer going into your pension. What’s not to like about a bit of extra money for all your hard work?
3. Make the most of tax advantages
We all know tax can be a bit boring. But when it comes to your finances and your pension, it can really make or break you.
For every 80p you put into a group or individual pension, you will receive an extra 20p top-up in tax relief. This extra 25% bonus in relief (if you’re a basic-rate taxpayer) is huge. It would be much harder to try and get consistent 25% gains investing in the stock market!
All of this alongside your employer contributions can really help set you up for an amazing retirement.
4. Check in with your future self
Sometimes, looking out for future you can be tough. But it’s important to think about what you’d like your future to look like.
Spending just a little bit of time evaluating where you are and where you’d like to be will give you goals to strive for. When you start really contemplating this kind of stuff, it’s surprising how much direction it provides you with.
Other pension considerations to think about
It’s all well and good trying to boost your pension pot, but before you go down that road, there are some other things to think about.
Have you sat down to create a proper budget based on your current lifestyle to work out how much money you’ll need in retirement? I’m sure the more money you have the better. But if you hit your goals sooner, then it could mean an earlier retirement for you. Because no matter how much you save, the one thing you definitely can’t buy is more time.
Another thing to consider is whether you have a partner with whom you can share savings goals and living expenses. You may also need a bit of foresight to consider little events like having children or grandchildren. This may be way off on the horizon right now, but some preparation today will help make your life much easier down the road.
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.
Some offers on The Motley Fool UK site are from our partners — it’s how we make money and keep this site going. But does that impact our ratings? Nope. Our commitment is to you. If a product isn’t any good, our rating will reflect that, or we won’t list it at all. Also, while we aim to feature the best products available, we do not review every product on the market. Learn more here. The statements above are The Motley Fool’s alone and have not been provided or endorsed by bank advertisers. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended Barclays, Hargreaves Lansdown, HSBC Holdings, Lloyds Banking Group, Mastercard, and Tesco.