Local independent financial adviser, Becky Hammonds of Willow Financial Solutions, looks at what savers can do to boost their pension:
Deferring take-up on your pension for a few years can substantially increase your pension.
Make sure you save into a pension – even if you are not working.
You can still save up to £2,880 into a pension each tax year if you are not working, and the government will boost this by £720 through tax relief, which means £3,600 in total goes into your pot. These are the figures for the current 2021-22 tax year.
The full new state pension is currently £179.60 a week. You will need 35 years’ worth of qualifying NICs to receive the full state pension, which may consist of earnings-related contributions, national insurance credits.
Also, you can currently make-up any lost years of NI but this all changes in April.
Most people aged between 45 and 70 are currently able to buy missing National Insurance (NI) contributions going back to 2006.
This is important, because you need 35 years on your NI record to claim the full new state pension.
If you have less years than this, your state pension will be less – and you need ten years to get anything at all.
But after April 5, 2023, you’ll only be able to fill gaps going back six tax years – so if you’ve got many years missing on your record, you don’t have long left to do something about it.
This is because “transitional arrangements” that were brought in when the new state pension system started in 2016 are coming to an end.
Buying back one year of class 3 NI contributions costs roughly £800, but could add up to an extra £275 each year to your state pension.
You can check your record at gov.uk/check-national-insurance-record to see what you have paid, up to the start of the current tax year.
Other tips:
– Contribute as much as you can to your pension – and start early. Compound interest remains hugely underrated and poorly understood by savers.
– Check the charges on your historical pension pots. See if consolidating your pots will bring them down.
– Check how much your state pension will be and when you’ll get it. If it’s not going to support your ideal lifestyle, plan how you’ll cover any shortfall by establishing other savings or investment vehicles.
– Put a bit more into your pension whenever you get a pay rise.
– Talk through your pension planning with your partner. Make sure you know about each other’s saving plans, contribution limits and that you are both on the same page.
– Carry out a regular ‘Midlife MOT.’ It’ll help you see how your finances are doing, and allow you to check in on your work and health wellbeing too. An independent financial adviser is well placed to work through your current situation and help you establish retirement objectives.
– Make use of free support like the MoneyHelper or Retirement Living Standards websites.
– Keep a regular eye on your pension to make sure you’re in full control of it and saving for your ideal future.
For pensions and investment advice contact Becky Hammonds on 07969 269677 or email becky@willowfs.co.uk
