As we approach 2024, a key resolution for many will be getting financially fit for the future and pensions are often a key part of this.
A long-term lack of engagement can lead to a real fear of the unknown with people scared to look too closely at their pensions in case they are well behind where they need to be. Recent research from Hargreaves Lansdown shows 62% of people are unsure if they can afford to retire.
However, there is no need to despair as even the smallest amount of spring cleaning can significantly perk up your pension prospects.
1. Boost pension contributions
People tend to “set and forget” their pension contributions but making the decision to revisit them at key points — for instance when you get a payrise or a new job — can make a big difference to what you end up with.
You may also find that if you increase your pension contribution then your employer will increase theirs — this is known as an employer match. This can give your pension a real boost without necessarily costing you much extra money.
Read more: Why you may be missing out on pension money
If you haven’t taken a look at your pension contributions for a while, then a New Year refresh could set you on the path to a more prosperous future.
2. Track down lost pensions
On average we are expected to have 11 different jobs over our working life and with auto-enrolment we could have a pension in most, if not all, of them.
As you move house and switch employers it can be easy to forget to update contact details and lose track of a pension.
Even the smallest pension can grow over time, and you could lose out on thousands of pounds that could go towards your retirement income.
Taking the time to make a list of where you have worked and checking to see if you have pension paperwork for each one is time well spent.
If you have lost a pension, then you can call the government’s Pension Tracing Service. You need either the name of your employer or pension provider and they will help you find contact details.
3. Consolidate
Once you’ve tracked down all your pensions then it can make sense to consolidate them.
This gives you an overarching view of what you have which can save you time, money and cuts down on pension admin.
Having everything on one place can help you make better long-term decisions. You may be tempted to take a small pension as cash and spend it whereas if it is part of a larger pot then you are more likely to leave it where it is.
However, you must check you aren’t giving up any benefits — such as guaranteed annuity rates by consolidating your pensions or incurring any expensive fees.
It’s also worth remembering it rarely makes sense to transfer a final salary pension.
Read more: Why you could pay more tax in 2024 – and five ways to avoid it
There’s a lot of choice when it comes to consolidating your pension. You may choose to consolidate into a current workplace pension, or you could opt for a SIPP which can offer extensive investment choice. It’s important to make your choice based on your needs.
4. Get a state pension forecast
The state pension is the foundation of people’s retirement income but not everyone gets the full amount.
How much state pension you receive is based on your National Insurance record and you need 35 years’ worth of contributions for a full state pension.
Getting a state pension forecast on the government website will show you how much you are on track to receive and identify any gaps that you can then plan to fill.
In terms of filling any gaps the first thing to do is check to see if you qualified for a benefit that comes with a voluntary National Insurance credit. Child Benefit or Universal Credit are key examples. If you were eligible then you can look at whether you can backdate a claim and get the necessary credits.
Read more: How to avoid an inheritance tax bill
You can also buy voluntary NI contributions for the past six tax years but there is currently an opportunity for men born after 5 April 1951 or women born after 5 April 1953 to plug gaps going back to 2006. The ability to do this expires on 5 April 2025 so if you think you can benefit from this then be sure to get in contact with Department for Work and Pensions’ (DWP) Future Pension Centre in plenty of time.
However, it’s really important to check with the DWP first to make sure you really will benefit from the extra credits. If you were contracted out at any point in your working life, then you may find you get less state pension than you thought.
5. What am I on track for?
Once you know what you’ve got pension-wise then you can make a plan.
It’s important to think about what kind of retirement you would like and then you can see if you are on track to get there.
Online tools such as pension calculators can give you a good idea of what you are on track to receive.
If you are on track, then that’s great but if you aren’t you can put a plan together to help you get there.
Watch: When should I start paying into a pension?
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