By Dan Kihato
It is important to ensure that you review your pension fund regularly. In case you detect that you have a shortfall, it will be clear that you need to take action. Even if your retirement funds are generally performing well, you can still do something to make sure that your retirement savings will be sufficient to meet your income goals and sustain you comfortably in retirement. Here are some smart tips to help you boost your potential retirement income.
Increase Your Savings
It’s obvious that the most understandable way to increase your pension fund is to save more. In case you have some additional income, then saving it in your pension fund is one of the most tax-efficient ways to invest it. Any spare income you invest into a pension will be automatically topped up by the taxman. If you have a workplace scheme in place, then depending on the rules of that scheme, your employer will boost their contributions if you increase yours.
But what about boosting your savings in the run up to your state pension age, or if you have already received it? Here are a couple insights that will help to ensure that you have a secure retirement:
- Make sure you’ve paid down debt
If you have any debts such as credit card or personal loans, then make sure these are paid off before your state pension age. The interest that you are paying against these debts will eat into your savings and leave you with less money in the long run.
- Inflation will reduce savings
We’re all worried about inflation hitting our savings, but did you know that if you don’t take action this is precisely what will happen? The Retail Prices Index (RPI) is used to calculate the annual increase of your state pension, meaning that if it is higher than the return on your investments then we can guarantee that your money will be reduced in value compared to when you first invested it.
Consider Consolidating Your Pensions
If you have several different pension schemes, there are potential benefits if you merge them into one. For starters, you can keep better track of and manage your savings easily. You can save a lot if you switch from a higher-cost scheme to a low-cost one. You can free up more investment options if you’re merging your pension funds into one flexible scheme. Lastly, if you consolidate your pension pots into one defined benefit scheme, you can enjoy the flexibility of pension freedom since you can take out the whole or part of the pension fund once you attain retirement age.
Review the Fees Charged on Your Savings
If you’re already in a defined benefit scheme, you shouldn’t worry about the charges deducted from your pension savings. However, if you are in any kind of defined contribution scheme, the fees and charges deducted from your savings can significantly reduce the amount in your pension pot. There are different types of fees that you might be paying. You might be deducted fees for administering the pension scheme. You might also be paying up-front charges and on-going annual management charges for each of the different investment funds within your scheme. You need to be particularly cautious of charges where you are paying an investment manager to choose funds managed by other managers instead of selecting investments directly. Both investment managers will charge you — creating a double charge.
It is always advisable to constantly review your pension to see how it is performing and whether it will be sufficient to meet your income goals in retirement. Unless you’re a financial expert, it’s wise to consult a financial advisor before you decide to make any changes in your pension schemes. When you’re at the beginning of your career, especially if you’re young, one of the first things you probably thought of is to start saving for retirement.
Reviewing your pension at regular intervals is essential so that you can make necessary changes. If you haven’t done so yet, it is advisable that you review your pension now so that you can take advantage of opportunities when they arise. If you don’t act fast, it will be too late.