How to maximise your pension

Author: Scott Snedden

  1. Check your State Pension Benefits: The State Pension moved to a flat weekly amount from April this year.  If you reached your State Pension Age after this point and have built up the maximum number of qualifying years (currently 30), you will receive £155.65 p.w.  To check your entitlement you can request a forecast from the Future Pension Centre by post or phone (0345 3000168). Alternatively, visit gov.uk/future-pension-centre for more information.  If you find that you’re not on track to receive the maximum state pension, you may be able to make additional payments to replace any missing years within your National Insurance record.
  1. Maximise Your Contributions:  For most people nowadays, their pension fund will ultimately depend on four main factors – the contributions made, the growth rate these contributions achieve, the charges deducted and the timing of when they decide to draw benefits.

It is a balancing act for most people between living for today and saving for their future self but it is important to invest as much as you can realistically afford into a pension.  The Government will assist by adding tax relief of 20% to any contributions you make.

The workplace pension rules also mean that by 2018, all eligible employees will be enrolled into a pension plan and their company will have to make contributions to it.  You might have to match this amount personally but the Government will again add tax relief to your payments.

You could also increase your personal contributions by agreeing with your employer to make them through Salary Exchange.  This can reduce both you and your employer’s National Insurance Contributions and these savings can be reinvested into your pension.

  1. Take Action Now:  The legendary investor, Warren Buffet once said that “My wealth has come from a combination of living in America, some lucky genes and compound interest”.  The first two points can be debated but the last point is within our own hands.  The sooner you are able to make contributions to a pension, the more time these will have to grow and achieve interest.  Through the years, this growth and interest itself compounds and your original sums increase.

You should also regularly monitor your pension plan to ensure the underlying investments are meeting your requirements, the charges remain competitive and you are on track to meet your retirement goals.   The benefits of compounding interest can be severely damaged by an expensive, underperforming arrangement.