5 effective ways to get the retirement you want after a lockdown pension freeze

According to a recent report by the Pension Policy Institute, 90% of people with a money purchase pension are at “high risk” of not achieving their expected retirement income. The claim – made in conjunction with the Centre for Ageing Better – is stark, but may not tell the whole story.

As Britain grappled with the impact of Covid, you may be one of the many people who froze their pension contributions as they faced financial uncertainty during lockdown.

If you are, you may now be wondering how to boost your pension to keep your retirement plans on track. Read on to discover five actions you could take to ensure you have the lifestyle you want when you finish work.

1. Increase the contributions you make to your pensions

Perhaps the most obvious way to recover the missed contributions is to increase future ones.

In the 2021/22 tax year you can contribute up to £40,000 tax-efficiently to your pension (or 100% of your earnings if lower). If you’re a higher earner, you may have a lower Annual Allowance, so seek advice from a financial planner.

If you’re considering boosting contributions, it may be better to start with your workplace pension scheme. This is because your employer will typically have to contribute as well and, depending on your scheme rules, may match any increased amount you put in.

This could help you get your retirement plans back on track much more quickly.

2. Consider carry forward if you have a lump sum to use

According to This is Money, the Bank of England estimates Brits saved £193 billion during lockdown.

If you now have a lump sum you could invest into your retirement fund, you might be able to use “carry forward”. This allows you to use unspent Annual Allowance from the previous three years, enabling you to make a contribution above your usual limit.

This is subject to stipulations. For example, you must use up all of your current year’s allowance before starting on previous years’, and already have a relevant pension scheme.

Always speak to a financial planner to confirm how much carry forward you can use and that it’s right for you.

3. Defer retirement and, potentially, your State Pension

You could delay your retirement and continue working so that you can contribute to your pension for longer, helping it grow to the level you need it to be at.

Beware though: if you work part time and switch on any income from a money purchase pension scheme – which can include workplace pensions – you may be impacted by the Money Purchase Annual Allowance (MPAA).

This could reduce your Annual Allowance to just £4,000 a year, meaning you may pay more Income Tax and see less potential growth in your pension pot.

Another option could be to defer your State Pension. If you do this the government could give you more when you draw it later on, although you need to consider if this is best for you.

4. Check whether you have any lost pensions

According to the Telegraph, early £20 billion of pensions are still waiting to be claimed in the UK.

One reason is that pensions can be “lost” or forgotten about as people move jobs and lose track of them.

If you think this may have happened to you, or you want to check whether there may be a pension you have forgotten about, speak with a financial professional. They can help you to track down lost pensions and provide you with options for any old pension pots you discover. The government’s Pension Tracing Service can also be a good place to start.

One option might be to merge the pensions with existing ones to increase the size of your pension pot, which could help boost future potential growth. Care should always be taken if you are thinking about consolidating pensions, so speak with a financial planner to ensure you understand the risks and to confirm it’s right for you.

5. Include ISAs as part of your retirement strategy

If you have separate investments or savings, consider bringing these into your retirement strategy.

If you have ISAs, for example, they can provide funds to live off that are free of Income and Capital Gains Tax, allowing you to defer taking an income from your pension. Doing this could mean you can leave your pension invested for longer, exposing it to greater growth potential in the future.

A financial planner will be able to confirm whether this approach could work for you.

Get in touch

If you would like to discuss your retirement plans and pension, please email me on a.douglass@grosvenorconsultancy.co.uk or call my office on 01793 766 123. Alternatively, call my mobile on 07525 177 046.

While I offer high standards of service and will work with you to ensure any plan is right for you, I’m also a busy mum, so work Mondays and Tuesdays only.

Please note

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.

A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation, which are subject to change in the future.

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