How to Do More With Your Pension

Please note this blog post was published over 12 months ago and so may not include the most up-to-date information, for example where regulation around investing has changed.

How to Do More With Your Pension

Investing in a Pension is all about the long term. Over many decades, you contribute into a pot of money that is invested in a Portfolio which aims to grow into a sum large enough to fund your retirement.

It’s always a good time to consider how far your Pension pot has come in the past ten years, and to think about how to get the most out of your Pension in the next ten years.

Whatever your goal retirement date is, how you invest in your Pension now could make a big difference to your ultimate pot. Here are some simple steps to help you get the most out of your Pension.

Increase contributions

The more you invest now, and the longer the length of you time you can leave it invested for, the more growth you could potentially achieve, through compound growth, where you achieve growth on the original investment and then growth on growth. This cycle can snowball into growing your investment into something far bigger than your original contribution.

So one of the steps you can take right now on the way to enjoying a richer retirement is to simply increase your Pension contribution. You can automate this with a direct debit, set up a direct debit amount today and you can ensure your contribution is consistent each month. This allows you to benefit from pound cost averaging.

Maximise tax relief

By increasing your contribution, you are also increasing the amount of tax relief you will receive on your income. Some of the money that would have gone to the government will go to your Pension pot instead. As a basic rate taxpayer you will see 20% tax relief claimed automatically, the extra 20% and 25% for higher and additional rate taxpayers can be claimed via self assessment.

So, if you want to keep as much of your salary as possible, then pay as much of your payslip as possible into your Pension.

Assess your circumstances

When thinking about your Pension, think about your personal circumstances. Age is a big factor to consider, as this could inform the level of risk you are comfortable to take.

The start of a new decade is a good time to take stock, look at your Pension and how this relates to where you are now and where you expect to be at the end of this decade. You may want to adjust your contributions and risk profile accordingly.

Consolidate Pensions

It is easy to accumulate Pensions, especially if you’ve changed jobs regularly in your career.

This presents a disadvantage, as multiple Pensions could mean multiple costs, ultimately driving down the returns of your investments.

Use the Tax year 2021/22 as a time to sit down and dig out all of your old Pensions. Consolidate these Pensions into one, to benefit from just one charge and more opportunities for potential growth with a single larger pot.

Stay diversified

Ensure your Pension is invested in a globally-diversified Portfolio. This helps to make sure your eggs aren’t all in one basket, with the aim of reducing your exposure to risk. If one asset class under-performs, another asset class may over-perform.

For example, the True Potential Portfolios are invested in multiple regions across the globe, with asset allocations in the UK, North America, Europe, Japan, Asia Pacific, and emerging markets.

Add a lump sum to close your gap to goal

If you come into some extra cash, why not add it as a lump sum to your Pension? This can help you close your gap to goal, potentially helping you to retire sooner or wealthier.

With True Potential you can impulseSave® anytime, anywhere, helping you top up your Pension in a way that is both simple and effective.

Leave your Pension invested

If you are over 55 and thinking about withdrawing some of your Pension, consider how much your money could be worth if left invested. What extra growth could you be missing out on? Remember, if you do want to take some of your Pension, you don’t need to take it all at once.

With investing, your capital is at risk. Investments can fluctuate in value and you may get back less than you invest. Past performance is not a guide to future performance. Tax rules can change at any time. This blog is not personal financial advice.

Investing, Pensions, Personal Finance