An expert has shared some tips around pensions (Image: Getty)
People have been urged to read up on some key rules around pensions. Savings experts have shared several tips on how to ensure you have enough saved up for retirement.
Andrew Prosser, head of Investments at investing platform InvestEngine, explained the key principles to remember when it comes to building up your funds for your golden years. He said: “To ensure a secure retirement, individuals should focus on maximising contributions, consolidating pensions, and taking full advantage of tax relief.”
The expert said a good place for many people to start is by looking at their workplace pension contributions. He said: “Start by maximising workplace pension contributions. Under auto-enrolment, employees typically contribute 5 percent of their qualifying earnings, with employers adding at least 3 percent.
Read more: State pension update over changes to National Insurance qualifying years
Read more: State pension rule change alert over ‘different retirement ages’
“Many employers offer higher contributions or even match additional contributions, which can significantly boost your retirement savings.” Another option you can look at is a self-invested personal pension (SIPP), where you can get tax relief on your pension contributions, similar to a workplace scheme.
Tax relief benefits
Mr Prosser explained the tax advantages: “Contributions to a SIPP receive Government tax relief, effectively increasing the amount invested. For example, if a basic-rate taxpayer (20 percent) contributes £8,000, the government adds £2,000, making a total of £10,000 in the pension.
“Higher-rate (40 percent) taxpayers can claim additional relief of up to £2,000, and additional-rate (45 percent) taxpayers up to £2,500, making contributions an effective ‘guaranteed return’. On top of this, investment growth in a SIPP is free from capital gains tax, and income tax is deferred until you access the funds.”
If you create a SIPP with InvestEngine, they do not charge any platform fees, allowing you to keep more of your money invested in the scheme. This can make a big difference over the long run – if you paid in £500 a month for 40 years with a 5 percent annual return, you could lose out on £130,000 if you had to pay 0.75 percent annual fees.
This may reduce your fees
You may also want to track down and consolidate any old pensions you have. Mr Prosser said: “The average UK worker holds nine jobs during their career and often ends up with multiple pension pots. Bringing them together simplifies management, gives a clearer picture of your retirement progress, and may reduce fees.”
He explained how to recover any lost pension pots you may have. The investment expert said: “To find lost pensions, start by listing all previous employers. If you suspect gaps, the Government’s Pension Tracing Service can provide contact details for former pension providers.
“Once located, transferring pensions to a single provider like InvestEngine can make them easier to manage. Consolidation allows you to monitor your investments, optimise contributions, and in some cases, benefit from transfer incentives.”
InvestEngine offers £5,000 cashback when making a pension transfer from many major pension providers.
