Are you looking for ways to make your pension grow even faster? Here’s 10 things you could do.
It doesn’t matter how old you are, pensions are important. If you’re still young then retirement may feel a million years away and not really take up much thought, but the money you put into a pension now is what you’ll live off when you’re older. That’s pretty obvious, right?
So, with that in mind, what can you do to ‘supercharge’ your pension and make it as big as possible. Here are a few ideas that you can ponder on:
- Start early
If you’re still young, then starting to pay into your pension early can help you get more potential out of your money. Not only do you have a longer timeline to save for, but your investments have also longer to benefit from compounding. Compounding happens when profits from your investments are reinvested and are able to make profits of their own. Those profits could then make more profits which could make more profits etc. etc. etc. The longer this happens for the bigger your potential.
- Just start
If you’re not young, that’s fine, just get started. Why put off until tomorrow what can be done today, as they say. Regardless of how old you are, taking the first step to engage in your pension journey is important. For example, say you’re 50 and you plan on retiring at 65, if you put away £200 a month in a personal pension then it could give you an extra £58,318 to retire with.
- Know where your pensions are
Most people have a few jobs over the course of their lifetime, but that often means that they’ll have several workplace pensions knocking about too. It can be easy to lose track of a pension with nearly 17% of Brits having misplaced one or all of their pensions.[2] By just being active and keeping track of your pensions, you could save yourself a lot of hassle, time, and worry trying to find your lost money.
- Check how you’re investing
The other issue with workplace pensions is that you don’t tend to have much of a say in how they’re being invested. This could mean that you might not have an ethically invested pension, or that the level of risk isn’t right for you. If you’re not sure how your pension is being invested, then how do you know it’s right for you?
- Make lump-sum payments
This might not be an option for everyone, but if you have a savings pot that just keeps growing then it may be worth paying a lump sum into your pension. For example, if you put £5,000 into your pension you’ll automatically get £1,250 in tax relief, then, by the time you retire at 67, your £5,000 could be worth £23,839!
However, before doing this, you should be sure about it as you can’t take the money out again until you turn 55.
- Bump up your payments
If you really want to supercharge your pension, then a quick way of doing that could be to ramp up how much you’re paying in. What’s more, you might just be surprised at what a difference it can make. For example, say you’re 30 with plans of retiring at 67, if you pay £150 a month into your pension then you could have £185,089 to retire on. But by bumping this up by just £10 a month, you could have £197,428! And if you can put away £200 a month, your pension pot could be worth £246,785 that’s over £60,000 more just by adding another £50 a month.
- Just five more years…
If increasing your payments isn’t something you can commit to, then you still have other options available. One of these options could be ‘snoozing’ your retirement and not touching your pension for a few more years. You see compounding, which we mentioned earlier, works better the longer it happens – kind of like rolling a snowball down a hill. At first, it’ll only pick up a little bit but by the time it reaches the bottom of the hill it’s huge. Here’s a quick example – you’re 30 and you want to retire at 60, every month you put away £150 giving you a potential retirement pot of £121,876.[7] Now, imagine you snoozed your retirement for five years and kept everything else the same – your pension could now be worth £165,282.[8] And if you left it another five years and retired at 70, this could jump to £216,581! That’s nearly £100,000 more just by putting off your retirement by 10 years.
- Check your fees
Pension fees can eat into your retirement, and the higher they are the more they’ll take away. Regularly checking your fees and comparing them to the market can help make the most of your pension by keeping your money, well, yours! And the more money that stays invested in your pension the more money you’ll have that can benefit from the power of compounding.
- Maximise your pay rises
You’re unlikely to be on the same pay forever, so when you do go up in salary it could be worth rethinking how much you’re paying into your pension. The amount you’re paying during your 20s is likely to be less than you could pay in throughout your 50s, for example. If you want to supercharge your pension, it could be worth increasing your payments in line with your salary increases.
- Combine your pensions
Having lots of pensions isn’t a bad thing, but there are a few downsides. For a start, they’re likely all using different fee structures and strategies which means that keeping track of your performance can be difficult. Moving them all into one place could provide you with more transparency and make it easier to manage.
