Enjoy a more comfortable retirement with these five pension maximising tips

When you retire, the size of your pension pot will dictate your level of comfort. So it’s important to maximise the size of your retirement funds, while you can.

A contributing factor to the size of your pension fund is the time you have it invested. Therefore, the age you are planning to retire at is crucial. This article also covers the factors that will affect when you can retire.

Five pension-maximising tips

It’s critical to prepare ahead for your retirement and get professional assistance from a financial expert like Portafina. We hope you find these five pension maximising tips helpful.

1) Start saving immediately

Right now is the best time to start saving for your future. Delaying will only reduce the amount of time your pension fund has to grow, meaning you will have less money when you retire.

2) Make regular top-up payments

Making regular top-up payments can have a massive impact on your pension pot. These payments benefit from tax relief and compound interest, meaning even small amounts can grow significantly over time.

3) Stay in your workplace pension scheme

Since the demise of final salary pensions, auto-enrolment into workplace plans has become the silver lining. Around 8% of your salary is value goes towards your retirement, including a 3% contribution from your employer. Opting out of a workplace pension scheme means you will be turning down thousands of pounds every year.

4) Check your pension’s performance

You should regularly check your pension to ensure it is meeting your requirements. Regardless of how much money you have in it, poor performance and high charges could be eroding your pension fund. By checking it, you have the opportunity to rectify this situation. A regulated financial advisor can help you with a pension check.

5) Extend your pension contributions

Working for an additional couple of years will extend the time you have to make pension contributions. The longer your funds are invested, the more opportunity to achieve compound interest growth.

Factors affecting when you can retire

The age you can afford to retire can be affected by several factors. Here are some to consider.

Longer working lives

Generally, people have longer working lives today than 15 years ago. The number of women aged 60-64 in employment has doubled, while there has been a 14.3% increase for men in the same age group. Today, more than 25% of 65 to 69-year-old men are still working compared to 15% in 1998.

Rising State Pension qualifying age

The qualifying age for the state pension is 66 for both men and women. It has risen steadily for women since 2010, who then qualified at 60. The qualifying age will likely continue to rise in the future. Even today, almost 50% of women do not plan to retire until they reach 67.

The full State Pension is £179.60 per week. You should factor this benefit into your retirement plans and consider if it will be sufficient to sustain your lifestyle.

Pension flexibility

The government introduced pension freedom in 2015, meaning that many people can access their pension funds at 55. This new flexibility gives you the option of taking a tax-free lump sum, other taxable lump sums or leaving your funds invested.

The prospect of receiving a considerable amount of cash at 55 may seem appealing. Indeed, in certain circumstances, it can prove beneficial. However, you should consider the implications of taking too much of your pension too soon. 

For instance, taking too much cash could leave you short of income when you fully retire. Therefore, you should think carefully before exercising your pension freedom. A regulated financial advisor can help you make the right decision.

Start saving now for a more comfortable retirement

Having worked hard throughout your career, you want your retirement to be when you can relax and do the things you want. Hopefully, these five pension maximising tips will help you enjoy a more comfortable retirement.

Photo by Tetiana SHYSHKINA