Four tips to boost your retirement savings in a cost of living crisis
Paying more into your pension might not be an affordable option right now. Luckily there are other ways to boost your pension value in the years leading up to retirement.
Last Updated: 6 April 2023
The cost of living crisis continues to impact our finances. It’s also impacting our confidence in whether we can afford to retire.
According to a recent survey, almost 40% of people said they didn’t feel confident about being able to afford to retire. This compares to 34% the year before.
It goes without saying that one of the biggest influences on the size of your pension is the amount you pay in. But ramping up how much you invest isn’t the only thing you can do to boost your pension in the run-up-to retirement. We look at four ways to boost your pension for free.
This article isn’t personal advice. If you’re not sure what’s right for your circumstances, please seek advice.
1. Make sure you get what you're entitled to from your State Pension
The new State Pension is £10,600.20 per year, but many people won’t get the full amount. This could be because they spent time out of the workforce caring for family or were overseas. You can check your State Pension entitlement by going online. Here you can view any gaps in your National Insurance contribution history.
While you can buy voluntary National Insurance contributions to fill these gaps, it’s important to check with the Department for Work and Pension (DWP) first whether this is the right approach. Instead, you might be able to backdate a claim for a benefit that would qualify you for an automatic National Insurance credit without having to hand over any money.
You should check with DWP that you’ll actually benefit from paying for voluntary credits. You might not benefit if you were contracted out of the State Pension at any point during your career.
2. Consider delaying your State Pension if you're working
If you can afford to, you can delay or even pause claiming your State Pension for a while. This will give you a higher State Pension income when you decide to stop work altogether.
Once you’ve started to claim the State Pension, you can only pause payments once, and you need to get in contact with DWP to let them know from what date you want to stop claiming. This cannot be a date in the past or more than four weeks in the future.
3. Give your pension more time to potentially grow
Many people might be tempted to take money from their private or workplace pension as soon as they can, but it can actually pay to leave it invested if you are happy with this risk.
If you can afford to delay taking your pension, take less or stop taking an income altogether, this can give your pension investments more time to potentially grow. If you choose to reinvest any investment income, any growth could multiply. This concept is known as compound investing.
Remember investments can fall as well as rise in value, so you could get back less than you invest. Money in a pension isn’t usually accessible until age 55 (rising to 57 in 2028).
4. Keep track of your pensions
Every time your life takes a different direction, you risk potentially losing thousands. With the cost of living jumping up, is this a risk you can afford?
You may not have realised it, but each time you move address, change your name or get a new job, you risk abandoning your pensions. This could have a huge impact on when you can afford to retire.
There’s an estimated 2.8 million lost or forgotten pensions in the UK. Each worth the equivalent of nearly £9,500 each. And the problem’s growing.
Unless we start to take control of our pensions, it’s been suggested that the forgotten pension pile could grow to a staggering 50 million by 2050.
If you think you’ve lost track of a pension, it’s worth getting in contact with your old employers to try and track them down. The government’s Pension Tracing Service can also help you find any lost pots. If you can remember the name of your employer or the provider, then this service can give you up to date contact details for them.
Once you’ve found any lost or old pensions, you could make your life easier and consider combining them together in the HL Self-Invested Personal Pension (SIPP). You could also get cashback as a thank you. Terms apply.