Your pension might not be the most exciting thing to think about, but it matters a lot. The good news? There are some really straightforward things you can do to help your savings go further. Nothing complicated, just small steps that can make a big difference later on. Let’s take a look.
Increase Your Savings
The easiest way to grow your pension is simple: save more.
If you’ve got some extra income, putting it into a pension is one of the smartest, tax-efficient ways to invest it.
Any extra cash you put into your pension generally comes with a nice bonus in the form of tax relief. This means you could either save on tax upfront or have more money added to your pension, with the potential to get some tax back, too.
Got access to a workplace pension scheme with employer contributions? If so, consider increasing your contributions. Depending on the scheme’s rules, your employer might match your extra contributions, giving your pension an even bigger boost.
Make Sure You’re Getting All Your Tax Relief
If you’re a higher-rate taxpayer and you’re paying into a workplace or personal pension that uses the ‘relief at source’ method, it’s worth double-checking what you’re actually getting back.
With this setup, the government automatically adds basic rate tax relief (that’s 20% of your gross contribution) straight into your pension pot. But if you pay a higher rate of tax, you’ll need to claim the extra relief yourself usually through your self-assessment tax return.
Most personal pensions work this way, but some workplace schemes are different. In some cases, higher-rate relief is applied automatically, and you don’t have to do anything.
If you’re not sure whether you’re getting the full higher-rate relief, it’s worth checking with your pension provider, it could mean more money in your pot.
Take a Look at Where Your Pension’s Actually Invested
If you’ve got a defined contribution pension — either personal or through work — you’re in control of how your pension pot is invested.
Usually, your provider gives you a choice of funds to pick from. Each one is made up of different types of assets, and those assets carry varying levels of risk and potential return.
As a general rule, the younger you are, the more risk you can afford to take. That’s because your money has more time to ride out the ups and downs of the market. If retirement’s still a while off and your pension is sitting in something too cautious, it might be worth thinking about shifting at least part of it into assets with more growth potential — like company shares.
That said, it’s important to remember that higher growth isn’t guaranteed.
If you’re considering more flexibility, moving your personal pension into a SIPP (self-invested personal pension) could open up a wider range of investment choices. But this also comes with extra risk — especially if you’re not familiar with investing — and it might cost more in fees.
If you’re not confident about the ins and outs of pension investments, it’s a good idea to speak to a regulated financial adviser before making any big changes.
And if you’ve got a defined benefit workplace pension, this bit doesn’t apply — the investment decisions are handled by your employer. They take on the responsibility for generating the returns needed to fund the income you’re promised.
Know What You’re Paying in Pension Charges
It’s easy to overlook the fees tucked away in your pension, but over the years, they can really add up. Every pension provider charges something for managing your money and handling your investments — it’s just part of the deal.
If you’ve got a defined contribution pension (whether it’s personal or through work), these costs are usually called an annual management charge or ongoing charge figure. They’re taken out of your pot automatically, so you might not even notice them unless you look closely.
But here’s why it matters:
An annual fee of 1.5% could chip away a quarter of your pension over 35 years. Compare that to a 0.5% charge, which would only reduce your pot by around a tenth over the same time. That’s a big difference.
If you’re in a defined benefit pension, this isn’t something you need to worry about — the scheme handles it all for you. But if you’re in a defined contribution plan, it’s definitely worth keeping an eye on. Workplace pensions often come with lower charges, but not always.
You could be facing a mix of charges, like:
- Service or admin fees – These are common with personal pensions like SIPPs. If you’re paying them, make sure you know exactly what they’re for and whether they’re worth it.
- Fund-specific charges – Some investments take a cut when you start investing (anywhere from 0% up to 6%) and then charge an annual fee, typically between 0.1% and 2%.
Take a few minutes to see what you’re actually paying. If the costs seem high and you’re not seeing the value, you might want to look at switching to lower-fee funds — it could make a real difference to your final pension pot.
Thinking About Combining Your Pension Pots?
If you’ve built up a few different pensions over the years — maybe from changing jobs or setting up a personal plan — it might be worth considering whether to bring them all together into one pot.
Doing this can have some real benefits:
- It’s easier to keep track of your savings and manage everything in one place.
- You could save money by moving from a higher-cost pension to one with lower fees.
- You might get a wider range of investment choices.
But before you jump in, there are a few important things to watch out for:
- Don’t transfer out of a defined benefit pension unless you’ve had regulated financial advice — and even then, it’s usually not recommended. These pensions come with a guaranteed income in retirement, which protects you from market ups and downs.
- If you’re still working for an employer and contributing to their pension, don’t move that pot unless you’re sure it won’t stop their contributions. Losing out on that employer top-up is rarely worth it.
- Got any guaranteed annuity rates? These can be really valuable if you’re planning to buy an annuity later, so think carefully before giving them up. Some schemes also offer other perks — like a guaranteed growth rate or a larger tax-free lump sum — that might not be available elsewhere.
- Check for exit fees. Some providers charge you for moving your money out, so it’s worth finding out if there’s a cost involved.
Bottom line? Unless you’re totally confident about what you’re doing, it’s a good idea to speak with a regulated financial adviser first. They can help you weigh up the pros and cons and avoid losing out on valuable benefits.
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