When considering ways to increase your retirement pot there are a number of options you may wish to consider.
Consolidating Your Pension Pots
Bringing all of your Pension pots together can have some significant advantages. Not only can you see more easily how much you have got in your pension fund it can also allow you to reduce the costs and improve performance.
Pensions taken out sometime ago often have higher fees and can suffer from poor investment performance. Moving these plans into one pension pot gives you more control and focus on your retirement goals which can lead better investment performance and lower charges to increase your retirement income.
Watch out for exit penalties on your existing fund, paying over the odds for advice, or being lured into a higher-charging product. If you are close to retirement, you might not have time to recoup the costs even if you do move to a better-performing fund.
Making Pension Contributions
If you want to give your pension fund a boost, you can top it up with a lump-sum investment. You can get tax relief (20pc for a basic rate taxpayer and 40pc for a higher rate tax payer) on up to £40,000 of pension contributions a year. Your allowance can be topped up for the current tax year with any allowance you didn’t use from the previous three tax years. However, bear in mind that you still only get tax relief on up to 100% of your earnings.
Choose lower cost versions of your investments
Investment fees sound small in percentage terms, but they can eat up thousands of pounds of your retirement pot, so you need to make sure you’re investing as cheaply as possible. If you’re investing directly with fund management firms, switching to a platform or a broker could save you money. You should also review your individual pension funds and, where possible, switch to a cheaper alternative. For example, switching out of a tracker fund with a 1% annual charge and buying one with a 0.25% fee instead will save you a lot of money over the long term as your investments grow and is one of the best ways to increase your retirement pot.
Studies in the USA and Canada have shown that Retirement savers who took investment advice enjoyed a median annual return almost 3% higher than those who didn’t — even after the fees they paid for that advice. Follow the links below to read more on this research.
If you feel that you need the security of an Annuity in Retirement (guaranteed income for life) make sure you shop around. You can often significantly increase the level of income (up to 30%) by taking your pension pot to a new provider. Further increases can be secured if you factor in any health issues such as weight, high blood pressure, diabetes and if you smoke. This is not an exhaustive list so make sure you let the provider know about any health conditions that you might have. If you’d like some help shopping around, you can contact us here.
Why not use our free pension calculator App to consider the impact of each of the above factors (and more) on your potential retirement pot.
If you would prefer us to contact you to discuss ways to increase your retirement pot you can request a call back by completing the form below.