February 08th, 2023
4 of the most effective ways to supercharge your pension pot in 2023
When you reach the run-up to retirement, you could find yourself worrying about your pension.
You might ask yourself questions, such as:
- Will my pension (and other sources of income) be enough to live on?
- Will I be taxed on my pension?
- Do I have all my pension documents in order?
- What happens if my pension loses value in the coming years?
While it is not always possible to answer these questions right away, going through your pension circumstances with a fine-toothed comb can be a great place to start.
If you plan to retire in the coming few years, deep-diving into your pension, or pensions, and figuring out how you could “supercharge” them in the near future, could be hugely constructive.
While past performance is not a reliable indicator of future performance, and your pension can lose as well as gain value, there are some surprisingly easy ways to boost your chances of growing your pot this year.
Here are three of the most effective ways to supercharge your pension pot in 2023.
1. Track down lost pension pots
You could be surprised to learn that, according to PensionsAge, approximately £37 billion lies in “lost or dormant” pension funds, spread across an estimated 1.6 million savers.
If you have had many jobs in your lifetime, you could have a number of pension pots sitting unclaimed. For example, if the pension provider from an old workplace no longer has your correct contact details, you could have additional pension assets you have forgotten all about.
By retracing the steps of your career, you could find any lost pots and reclaim them. You can use the government’s free pension tracing service, or speak to your financial planner for advice on tracking down a lost pension.
2. Continue paying into your workplace pension
Throughout 2022 and in the first few months of 2023, the cost of living crisis has been a headline almost every day.
One little-discussed casualty of the cost of living crisis has been a reduction in pension contributions nationwide. Research from insurer Aviva has found 1 in 4 Brits is considering pulling back on their pension contributions as household costs rise.
It might sound simple, but one way to supercharge your pension this year is to keep paying into it. Although it could be tempting to use the funds to cover everyday costs, pausing pension contributions as retirement approaches can hurt your later-life income.
3. Consider the pros and cons of pension consolidation
In the final few years before retirement, you may be entirely focused on growing your pension in the most cost-effective way before you begin to draw your funds.
While there is no right or wrong decision when it comes to consolidation, weighing up your options could be a wise move. Assessing how consolidating or tending to multiple pots could affect your wealth in these crucial few years may put you in a great position.
Some pros of consolidation to consider include:
- Paying one set of administrative fees rather than many
- More easily keeping track of your pension’s total value
- Having one point of contact with one pension provider, rather than several
- A simpler process when you come to draw your funds.
Despite the clear benefits, consolidation isn’t right for everyone. There are some potential downsides to putting all your eggs in one basket, including:
- Potentially losing access to pension-linked cover, including life insurance
- Missing out on employer contributions, if you consolidate into one pot that your current employer doesn’t pay into
- Possibly exposing your pension to greater level of risk if markets fluctuate.
Ultimately, it is vital not to rush the decision to either consolidate, or keep your pensions separate. Taking the time to research consolidation and making a decision based on your unique circumstances can help put your pension in favourable conditions over the next few years.
4. Work with a financial planner in the run-up to retirement
A report published by Just Group in November 2022 reveals that more than half (53%) of the private pension pots in 2021/22 were accessed by “DIY dippers” – those who took their pension without professional advice.
What’s more, the report shows 65% of pensions taken unadvised in 2021/22 were a “full withdrawal” – an option that could incur a much higher tax bill than necessary.
This is just one example of how working with a financial planner as you approach retirement could be a smart move.
We understand that preparing to retire can be a little overwhelming at times. Whether it’s putting your pension fund in a favourable position for returns, considering consolidation, or creating a pension contribution plan for the coming years, we can help you supercharge your pension in preparation for retirement.
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This article is no substitute for financial advice and should not be treated as such. To determine the best course of action for your individual circumstances, please contact us.
The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Levels, bases of and reliefs from taxation may be subject to change and their value depends on the individual circumstances of the investor.
Workplace pensions are regulated by The Pension Regulator.