Increasing the amount you’re saving into your pension can be a real challenge, particularly while living costs remain so high.
However, there are plenty of steps you might be able to take to boost your pot – and ultimately the amount you receive in retirement – from topping up your State Pension to increasing contributions into a workplace pension, with some you might not be aware of.
Here, we look at some of the different ways you can top up your pension, including those that do not involve finding more spare cash to put away.
If you’re considering getting professional financial advice, Unbiased is offering Rest Less members a free pension review. It’s a chance to have a qualified independent financial advisor (IFA) take a look at your pension arrangements and give an unbiased assessment of your retirement savings.
The review is free and without obligation, but if the IFA feels you’d benefit from paid financial advice, they’ll go over how that works and the charges involved.
Contents
- Make the most of employer contributions
- Pay in more when you’ve dealt with debts
- Start paying into a private pension
- Top up your State Pension
- Set up salary sacrifice
- Use an inheritance or work bonus to top up your pension
- Check your investment choices and charges
- Delay taking your State Pension
- Track down any lost pensions
- Make sure you haven’t been underpaid
- Get expert help
1. Make the most of employer contributions
If you’re an employee, it’s worth seeing if your company will pay more into your pension if you increase your contributions. Employer pension contributions can be thought of as a delayed pay rise that you’ll receive in retirement, and should be the first step when you’re looking to boost your pension.
Under the government’s auto-enrolment rules, you and your employer should be making a total minimum 8% monthly pension contribution if you’re earning over £10,000 a year (employers must pay at least 3% and the employee the remaining 5%). Read more in our article How does pension auto-enrolment work? to find out more about contribution limits.
However, many employers will pay more than this into your pension, so make sure you’re aware of your particular employer’s pension scheme rules. Some employers, for example, may agree to increase the amount they pay into your pension up to a certain limit.
So, if you put an extra few percent of your salary into your pension, your employer might match this, depending on their specific scheme rules. Ask your employer’s pension department for the scheme’s details. Paying more into your pension also has the benefit that you’ll get more tax relief, which can give your savings a significant boost. Find out more about pensions and tax relief in our guide How pension tax relief works.
2. Pay in more - but only once you’ve dealt with debts
If you’ve recently paid off a debt such as a car loan or credit card, you could pay any money you’d usually put towards this into your pension instead. Over the long term, even small amounts can make a significant difference to your retirement pot. Of course, you may need the money freed up from paying off debts to meet rising household expenses, but if you’re used to managing without this money then saving into your pension could be an option worth considering.
3. Start paying into a private pension
You could pay a little into a private pension every month on top of your employer’s scheme, if you wish (but maximise your employer contributions first). This might give you access to a wider choice of investments than your company scheme provides. If you’re self-employed, you may already be paying into a private pension scheme. You won’t benefit from employer contributions in a private pension, but you’ll still receive tax relief at your marginal rate.
There are different types of private pensions, including stakeholder plans, standard personal pensions, and self-invested personal pensions (SIPPs). They vary widely in terms of investment choice, and charges, so it’s important to choose the right one for you. Ultimately, though, how much you receive at retirement from any pension will depend on the contributions you’ve made into your pension, tax relief received, and investment performance over time, after charges. Read more in our articles How private pensions work and What is a SIPP and how does it work?
4. Top up your State Pension
You could also consider topping up your State Pension by paying ‘voluntary class 3 National Insurance contributions’ if you have gaps in your National Insurance record, or discover you don’t have enough years to qualify for a full State Pension. The rate to top up is currently £824.20 for a full year (£15.85 per week), which will boost your State Pension by about £275 a year (£5.29 a week). You’ll usually get your money back from a year’s worth of voluntary contributions within about four years of drawing your State Pension, which can make paying voluntary contributions particularly good value and potentially increase your pension by thousands of pounds over your lifetime.
You can find out how much State Pension you’re on track to receive by requesting a State Pension forecast, which will also include how much you’re on track to receive based on your current NI record, and how much you’re likely to get if you continue working up to State Pension age. If you’re not on track to receive the full amount (currently £203.85 a week in 2023/24) you need to check your NI record, which will show you any incomplete years in your record since 2006. Read more in our article Is it worth paying to top up your State Pension?
5. Set up salary sacrifice
You may be able to make pension contributions through your employer’s salary sacrifice scheme. This is when you give up part of your pay and in return your employer puts the money into your pension, alongside its own contributions. The benefits include lowering the amount of income tax and National Insurance you pay on your salary by reducing your overall salary. As employers make National Insurance payments for all of their employees, both you and your employer can end up saving through salary sacrifice this way. Read more in our article What is salary sacrifice?
However, check the details of how this works. Certain employers, as well as any personal or private pension scheme, will have what’s known as a ‘relief at source’ arrangement. In this case, they will deduct your 80% pension contribution and send it to your pension scheme after taking income tax first. Your pension scheme then claims the remaining 20% directly from the government. In this case, you will have to contact the tax office or complete a self-assessment tax return to claim your extra relief if you are a higher or additional rate taxpayer.
6. Use an inheritance or work bonus to top up your pension
If you find you come into a lump sum through an inheritance, for example, or work bonus, you could use some or all of this to pay a lump sum into your pension. As with other contributions, the government will top up the sum with tax relief of at least 20%. Find out more in our guide What should I do with an inheritance?
If you’re made redundant and given a cash lump sum, you could also put some or all of this into your pension. Bear in mind that the first £30,000 of redundancy pay is tax-free and payments above this are subject to income tax at your marginal rate. You could ask your employer to put some or all of this money into your pension to save on tax that you’d otherwise be liable for.
If you do plan to put an inheritance or redundancy pay into your pension, remember that you can contribute a maximum of £60,000 into your pension and benefit from tax relief on this amount each year – this is known as your annual allowance. Find out more in our guide How do pension allowances work?
If you’ve already started taking money out of your pension, any subsequent payments into your pension become subject to Money Purchase Annual Allowance rules, which restrict the amount you can contribute to your pension going forward to £10,000 a year. Read more about this in our article What is the Money Purchase Annual Allowance?
7. Check your investment choices and charges
Where your pension is invested can make an enormous difference to the value of your pension when you retire. You can ask or check online where your company or personal pension is invested, and how your investments are performing.
If you’re invested in your employer’s ‘default’ investment scheme, for example, you may find that this isn’t always the best option for you. Depending on your age, and attitude to risk, you may be able to select more appropriate investments to suit your needs. Alternatively, your money may be languishing in a pension with high charges, which are eating into the value of your pot. You can find out more in our articles Where is my pension invested? and What pension charges am I paying?
8. Consider delaying taking your State Pension
You’re able to claim your State Pension once you reach the current government retirement age of 66, and you may start claiming it while you’re still working. However, you could also choose to delay taking your State Pension if you don’t need the income, in order to receive a greater amount at a later date.
The government will increase your State Pension payments by 1% for every nine weeks you defer, which works out at around 5.8% a year. You will receive an extra £10.42 a week by deferring your State Pension for 52 weeks, for example. You may want to do this if you’re planning to work beyond State Pension retirement age, or have other income to draw on such as money in savings accounts or individual savings accounts (ISAs). Read more in our article Eight reasons you might decide to defer your State Pension.
9. Track down any lost pensions
Billions of pounds is currently languishing in pension pots waiting to be claimed by their owners, so if you think you might own a share, make sure you claim what’s yours. You may have lost track of a pension from a job you held years ago, or a private pension that you opened decades ago, but no longer have the details for.
If you’re trying to track down an old workplace pension, start by calling the pension provider. Most big pension providers will have a customer number on their website so if you know who your pension is with, you should be able to simply pick up the phone and give them a call. If you paid into a private or personal pension, try and find any old paper work you might have with the pension provider’s name on it. If you’re struggling to find an old pension, the government’s Pension Tracing Service may be able to help. Find out more in our guide Tracing lost pensions – How to find my old pensions.
10. Make sure you haven’t been underpaid
The latest State Pension scandal has seen thousands of mothers left out of pocket after mistakes were made by the Department for Work and Pensions (DWP) when calculating their State Pension entitlement. The errors affect women who have taken time off work to raise children since 1978, and were highlighted in the DWP’s July 2022 annual report. Read more and find out how to claim money owed in our article Thousands of mothers could be owed State Pension back payments.
The issue follows the scandal surrounding underpayment of the State Pension to married women and widows who claimed their State Pension before April 2016. Those in this group may have been paid less than their State Pension entitlement due to government errors and are set to receive £3 billion over the next six years.
Consultancy Lane Clark and Peacock has set up a useful calculator to help married women identify if they have been underpaid. You need to enter a few basic details, such as you and your husband’s ages and how much State Pension you each currently receive, and the calculator will let you know if you might be getting less than you’re entitled to.
If you think you have been underpaid your State Pension, get in touch with the Pension Service and ask if you’re owed any back payments. If you are, request that these are paid to you with interest added. You can contact the Pensions Service by telephone on 0800 731 0469 or find out more here. Read more in our article Women owed £3 billion in backdated State Pension payments.
11. Get expert help
If you have a defined contribution pension, you can receive free guidance on your choices at retirement from the age of 50 and above from the Government’s Pension Wise service. Call them on 0800 138 3944 to book a free appointment, or you can book through their website.
If you want advice that’s tailored to your personal situation to top up your pension and your potential income in retirement, you can find a local financial adviser on VouchedFor* or Unbiased*. For more information, check out our guides on How to find the right financial advisor for you or How to get advice on your pension.
If you’re considering getting professional financial advice, Unbiased is offering Rest Less members a free pension review. It’s a chance to have a qualified independent financial advisor (IFA) take a look at your pension arrangements and give an unbiased assessment of your retirement savings.
The review is free and without obligation, but if the IFA feels you’d benefit from paid financial advice, they’ll go over how that works and the charges involved.
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