5 tips to turbocharge your pension this tax year

As we enter the new tax year, it’s worth taking the time to think about what you can do to make the most of your pensions.

Even taking relatively quick actions like checking how much you’re putting in and whether you can afford to increase it can make a big difference over time.

The most recent data from HL’s Savings and Resilience Barometer shows only just over a third of households on track for a moderate retirement income.

So, what can you do to help boost your pension?

This article isn’t personal advice. If you’re not sure whether an investment is right for you, ask for financial advice. Investments and any income from them will rise and fall in value, so you could get back less than you put in.

Pension and tax rules can change, and benefits depend on your circumstances. Tax rates and bands are different for Scottish taxpayers. Remember, you can't usually access money in a pension until you're 55 (rising to 57 in 2028).

You can contribute whichever is the lowest of your annual income and £60,000 to your pension every year and receive tax relief.

If you have any unused allowances over the past three tax years, you can also use those to turbocharge your retirement planning.

This is known as carry forward and, in this new tax year, it means you can contribute up to £220,000 to your pension, like the HL Self-Invested Personal Pension (SIPP) – as long as you earn enough.

These are serious amounts of money that can make a major impact on how much you end up with in retirement.

If you’re a basic-rate taxpayer, you will usually receive the right amount of tax relief automatically. But if you pay tax at higher or additional rates, you will need to check.

Many private pensions, like SIPPs and some workplace pensions, are set up under what’s known as relief at source arrangements.

This is where contributions are deducted from your salary after tax.

The employer takes 80% of the contribution from the employee’s salary and then reclaims the extra 20% from HMRC.

This means if you’re entitled to tax relief at a higher or additional rate then you need to reclaim it, which you can do through online self-assessment.

If your pension is a net pay arrangement, where your pension contribution is deducted from your salary before income tax, then your scheme claims back tax relief at your marginal rate of income tax.

This means you don’t need to do anything further.

Similarly, if your pension is set up as a salary sacrifice arrangement, you won’t need to reclaim extra relief.

It’s well worth checking with your provider to see what type of scheme you’re in.

A recent survey* showed almost one fifth of people don’t know how much is going into their pension.

This means you’re less likely to know if you’re on track with your retirement saving.

It’s important to take the time to check what’s going in and see if you can afford to up how much you’re paying in.

Even small increases over time can make a big difference.

If you can’t afford to pay more in right now, it’s worth checking back next time you get a pay increase or even a new job.

It can feel daunting boosting your contributions during times of market turmoil. Just remember pensions are for the long term and, over time, markets recover.

Keeping up your contributions also means you benefit from pound-cost averaging.

That’s because regular investing helps smooth the ups and downs of the market over time.

By investing at many different times, you avoid the potential risk of investing all your money when the market is at its highest and investment prices are more expensive.

*Figures in this article are from a survey of 1,081 people by Opinium for HL in September 2024

In addition to your own contribution, see what your employer can offer you.

Many will contribute at auto-enrolment minimum levels, but others are willing to pay in more.

Some will operate what’s known as a matching contribution, where they’ll boost their contribution if you boost yours.

This can mean a lot more goes into your pension with only a relatively modest uplift from you.

It’s easy to lose track of a pension. But if you don’t track it down, you could be missing out on thousands of pounds.

Contact the government’s Pension Tracing Service.

You just need the name of the employer or pension provider, and the service can give you contact details.

Once you’ve found all your pensions, it might make sense to bring them all together.

This can make retirement planning a lot easier.

However, make sure you aren’t incurring any expensive exit fees or potentially missing out on valuable benefits like guaranteed annuity rates by doing so.