3 useful ways to boost your retirement pot

Category: News

The end of your working life is the start of a time when you can focus on the things you love in life. You’ll want to reap the rewards of hard work and prudent savings and enjoy a comfortable retirement.

But what happens if your retirement pot falls short of providing you with your dream lifestyle?

According to Unbiased, a luxury retirement budget – that provides a comfortable retirement along with expenses, like long-haul holidays or big ticket purchases like a new car – is expected to cost a single person at least £31,000 a year or £41,000 for a couple.

Meanwhile, the Social Market Foundation reports that, on average, Brits approaching retirement are nearly £250,000 short of the pension pot required to meet their desired retirement goals.

If you’re concerned that your current retirement pot might leave you with an income shortfall, don’t worry, and stay calm. 

Read on to discover three useful ways you could boost your retirement pot in the years leading up to your retirement. 

1. Consider increasing your pension contributions and utilising your Annual Allowance

Your pension will most likely form the backbone of your retirement income.

So, it is important that you try to maintain your monthly pension contributions and even consider the benefits of increasing them.

The more you save into your workplace or private pension pots, the more you could potentially benefit from pension tax relief, and the growth provided by long-term “compound returns” on the funds in your pot.

Under current workplace pension auto-enrolment rules, the minimum pension contribution is 8%, made up of a 5% personal contribution (including tax relief) and 3% from your employer. These employer contributions are effectively “free money” added to your pot.

HMRC provides tax relief on pension contributions up to the Annual Allowance, which stands at £60,000 (or 100% of earnings, if they are below this threshold) for the 2023/24 tax year.

Tax relief is automatically paid at the basic Income Tax rate of 20%. This means for every £500 added to your pension, you are only essentially paying £400, with the other £100 being added by the government. 

If you’re a higher- or additional-rate taxpayer, you could claim extra relief up to your respective rate of Income Tax through your self-assessment tax return.

Pension contributions could even help you resolve potential issues in the present, such as if you’re caught in an awkward 60% tax trap caused by a quirk in the tax system.

Read more: 2 million Brits face paying an effective tax rate of 60% — here’s how your pension contributions could help protect your income

With the removal of the Lifetime Allowance (LTA) charge in the government’s recent spring Budget, and the LTA’s expected abolition in 2024, saving into a private or workplace pension has never been more attractive.

2. Track down lost pension pots and consider the benefits of consolidation

Careers tend to span decades and you may find yourself switching jobs several times over the course of your working life. This might mean you’ve built up multiple workplace pension pots with different pension providers. 

It’s an easy thing to overlook when changing jobs, and you might have lost track of one or more of your old pension pots over the years.

According to PensionsAge, £37 billion has been lost or is lying dormant in UK pension pots, with an average value of £23,215 across 1.6 million savers.

Meanwhile, MoneyAge reports that 28% of Brits have contributed to three or more pension pots over the course of their working lives.

Tracking down any lost pots could provide your retirement income with a useful boost in exchange for very little work on your part. Finding lost pots can be a simple process as the government website provides a handy tracing system. 

You are likely to need only a few basic details, such as the name and address of a previous employer. 

Once you’ve located any missing pots, you could opt to consolidate them into one easily manageable centralised pot. However, there are pros and cons to doing this. 

Read more: How consolidating your pensions can be a valuable step towards your retirement goals

3. Make sure you unlock the full value of your State Pension

The State Pension provides a useful and easily attainable boost to your retirement income that, provided you accrue enough “credits” across your career, guarantees you an index-linked income for life.

The value of the State Pension is protected by the government’s “triple lock”, which increases its value annually by one of three measures – either by:

  • 2.5%
  • Average wage growth between May and July against the same period the previous year
  • Inflation – measured by the Consumer Prices Index (CPI) in the year up to September.

The BBC reports that the triple lock may lead to an increase of 8.5% in the State Pension for the 2024/25 tax year.

In 2023/24, the new State Pension is £203.85 a week, or around £10,600 a year. It is paid from age 66 (rising to 67 from 2028).

To be eligible for the full State Pension, you normally need to have accumulated 35 “qualifying years” of National Insurance contributions (NICs).

You will normally accumulate a year of “credit” if you:

  • Worked and paid NICs
  • Received NICs if you were unemployed, ill, or acting as a parent or carer
  • Paid voluntary NICs.

You can check your National Insurance record online. If you aren’t eligible for the full State Pension, you may be able to “buy” additional credits by paying voluntary NICs. 

This could be a cost-effective way of boosting your retirement income, but it won’t always be an option so be sure to speak to us.

There is also currently an additional opportunity to top up your State Pension provided by the government’s transitional window, which was recently extended to April 2025. 

This scheme allows individuals who worked prior to 2016 and who have years missing on their record to purchase credits dating back to 2006. 

To learn more about how this works and why it might be a beneficial step for your retirement income plans, you should reach out to us to discuss things further.

Get in touch

There are many simple but effective steps you could take to boost your retirement pot, so if you have any worries or concerns about your plans, remember that we are here to help.

Read more: 2 in 3 Brits aren’t confident about their retirement plans – are you?

The first step is to get in touch, so we can start the conversation. Please reach out to us by email at info@lloydosullivan.co.uk or by calling 020 8941 9779.

Please note: 

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Levels, bases of and reliefs from taxation may be subject to change and their value depends on the individual circumstances of the investor.

Workplace pensions are regulated by The Pension Regulator.

This article is for information only. Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.