How to increase your retirement savings
Whether you're in your 30s and are just starting to take saving seriously, or you're approaching 60 and want to boost that pot for the near future, there are some steps that you can take to increase your retirement savings.
Here are a few tips to get started:
Join your company pension scheme
If you're employed and haven't done so already, it could be worth joining your company's pension scheme.
There are a couple of reasons it's worth doing this –
1) Your employer will contribute to your pension too so it instantly increases what you're putting aside; and
2) Making contributions to a pension could give you an immediate boost in the form of tax relief.
Your employer may also agree to a salary sacrifice arrangement which could be even more beneficial.
Check your self-assessment tax return
If you're paying into a pension and earn over £50,000 a year, it may be possible to claim back higher-rate tax relief via self-assessment. It's one of the biggest benefits of paying into a pension, but many higher-taxpayers don't realise that sometimes this doesn't happen automatically. Let's look at the following example to see how much someone in this situation could potentially save.
– Steven earns £90,000 a year and pays the higher-rate of 40% tax on approximately £40,000 of this. If Steven were to pay £32,000 into a private pension during the same tax year, the basic rate tax relief of 20% will automatically be applied on the whole amount and £8,000 will be paid into the pension by HMRC, taking the total gross contribution to
£40,000. But, Steven could claim an extra 20% in tax relief, potentially resulting in a tax rebate of £8,000 at the end
of the tax-year.
For those that earn over £150,000, the tax relief could be even greater. Check whether this is something you should be
taking advantage of.
Use your carry forward pension allowance
In general, most people can contribute up to £40,000 into a pension every year – but not everyone uses their full allowance. If you think this applies to you, there could be a way to benefit from these tax-free savings still.
How? You may have the opportunity to 'carry forward' three years of unused allowance and benefit from significant tax relief. There are certain conditions that need to be met in order to be eligible for this, such as being a member of a UK-registered pension scheme for these years, but it's an option well worth exploring if you think you fall into this category.
Optimise other saving routes
Ask yourself if you can save towards your retirement – or improve how you are currently saving – in other ways. Whilst
pensions are often the best option for retirement savings, pension contributions aren’t always suitable or possible, depending on your circumstances. Individual Savings Accounts (ISAs) are an excellent alternative.
Each year, for instance, you can save up to £20,000 in an ISA with all gains and income being tax-free.
There are a range of ISAs to suit your individual needs too, such as cash ISAs, innovative finance ISAs, stocks and shares ISAs and Lifetime ISAs (LISAs).
Pension contributions are one of the few ways that directors of limited companies can extract profits tax efficiently.
This means, it's possible to make contributions directly from your limited company, which is often more tax-efficient than making a personal pension contribution.
A great way to save for your future.
For more help giving your retirement savings a boost, contact us on 01978 806505 or firstname.lastname@example.org to arrange a free 60-minute consultation. Alternatively, you can fill in our contact form and we will get in touch with you.
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