How to increase pension contributions

How to increase pension contributions

Saving enough for retirement is a top priority for many people. One of the most effective ways to grow your nest egg is to increase contributions to your pension. This article will explore easy tips to boost your monthly or one-off payments.

Assess your current contributions

The first step is understanding your existing pension contributions. Check recent payslips to see how much you and/or your employer currently contribute from each paycheque. This establishes a baseline to work from. If your employer offers matching contributions up to a certain percentage, contributing more yourself can significantly multiply your savings.

Bump up your payroll deductions 

Increasing the amount deducted from your regular paycheque is a simple way to increase pension contributions. Even small increments like 1% make a difference over time thanks to compound growth. And the amount deducted comes out before you receive your take-home pay, so you avoid the temptation of spending it. If you get a raise, allocate part of it towards higher pension deductions.

Add lump sum contributions

Another option is making one-off, lump sum contributions when you have extra funds available. Contributing a work bonus or tax refund are good opportunities. Adding even a few hundred pounds extra boosts your pension pot. And these lump sum contributions still benefit from tax relief.

Consolidate old pensions

Do you have pension pots from previous jobs? Consolidating old pensions can make it easier to keep track of your total savings. This also makes it simpler to increase contributions in one place. Platforms like iSIPP allow you to combine pensions and contribute regularly in a streamlined, cost-effective way.

Maximise allowances

Pay attention to annual and lifetime pension allowances when increasing contributions. Understand how much you can contribute tax free each year and over your lifetime. Making the most of these allowances gives your savings an added boost. A financial advisor can ensure you optimise allowances.

Increasing pension contributions now can pay off exponentially later thanks to tax relief and the power of compounding. Use these tips to give your retirement nest egg a helpful boost. Even small increases add up over time.

Pension contributions offer a tax-efficient route to building your retirement fund, with tax relief available up to specific annual allowances. As of April 2023, the annual allowance for pension contributions increased to the lower of £60,000 or your verifiable earned income, marking a significant rise from the previous threshold of £40,000. If you’ve taken taxable benefits, the Money Purchase Annual Allowance has also expanded to the lower of £10,000 (up from £4,000 in April 2023) or your provable earned income. Even in cases where no provable earnings exist, there’s still an opportunity for tax relief on contributions, with a fixed allowance of £3,600

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The content of this article is for general information purposes only and should not be construed as legal, financial or taxation advice. You should not rely on the information contained in this article as legal, financial or taxation advice. The content of this article is based on information currently available to us, and the current laws in force in the UK. The content does not take account of individual circumstances and may not reflect recent changes in the law since the date it was created. It is essential that detailed financial and tax advice should be sought in both jurisdictions and any legal advice, if required.

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