5 ways to increase your pension value

5 ways to increase your pension value

Taking the wise step of starting a pension fund and growing your pension value is just the beginning, particularly if you want to be sure that your retirement income matches your hopes and dreams.

There are actions you can take to maximise its potential. It’s never too early – or even too late – to take steps to boost your pension pot!

For some people, the temptation is to put pension savings into higher-growth investments in the lead up to their retirement. This is a sort of last minute shot at getting a healthy return.

However, this brings with it high risk. There is potential for investments to go down – reducing the value of your pension, or in extreme cases; severly damaging your pension fund value. This can leave you with too little time to explore other options with professional financial advisors and prevent you from building your pension savings back up.

So, what ways are there to increase the value of your pension fund, while managing risks?

1.) Increase your regular contributions

If you have disposable income, adding more to the amount you pay over time makes financial sense.

The temptation is to “spend now and save later”, particularly if you’re some way from your planned retirement date and retirement planning takes low priority.

Keep in mind that pension contributions at a healthy level before retirement qualify for tax relief. This can be particularly significant for higher-rate taxpayers.

2.) Delay the start of your retirement

The longer you leave your pension fund untouched, the more potential it has to increase in value. This may then increase the retirement income you will enjoy, could make it last longer in retirement, as well as the size of lump sums you can choose to take.

If you do decide to delay the start date of your pension pot payout, take some time to review it with an independent financial adviser. You need as much assurance as possible that your savings will continue to go upwards during the additional timespan.

3.) State pension entitlement

It’s easy to assume that you will get your maximum entitlement to State Pension to add to your private funds, but have you checked this?

To get a summary of your current status and any potential shortfalls in your National Insurance (NI) contributions – log on to the gov.uk website. It may be possible to make voluntary NI payments to fill any gaps. This makes sure you receive the maximum possible amount of State Pension.

It may also be possible to defer this pension fund also, to potentially increase the value of the monthly income you receive. However this can be detrimental in some cases, so it’s best to check with a professional financial adviser whether this is a good idea.

4.) Maximise your company pension fund

The UK now operates a system of Auto-Enrolment for company pension schemes. It means employers have a legal duty to provide a workplace pension as soon as you earn over a certain amount. Generous employers sometimes contribute more than the statutory amount.

Ask for a breakdown of how your company pension savings are calculated. You may also want to increase the percentage amount you pay automatically from your salary, if this is something you can afford. It will further boost your pension savings and therefore your retirement income.

5.) Explore pension fund fees

If you have ticked all those boxes in your retirement planning, there is still another important step to take. Don’t assume that your regular contributions to your private pension will leave you comfortably off.

One of the biggest problems that pension savers face is pension funds reduced by management fees that reduce investment returns!

There are various types of fees charged on a private pension. Make sure you have the full picture. This includes any annual account fees.

Seek professional help with your pension value

All of this makes seeking the help of professional financial advisers, who are authorised and regulated by the Financial Conduct Authority – highly attractive. Whichever methods you use to increase your pension value, the central theme is monitoring your funds carefully. This will also help you to move quickly if switching investment funds becomes the best way to grow your pension pot.