An expert has shared little-known tips that could help boost one’s pension pot to avoid them living in poverty during retirement.
The gap between the poorest pensioners and those on average incomes has been widening since 2011, according to the Institute for Fiscal Studies (IFS).
Poorer pensioners have fallen behind since 2011 in part because they have not benefited from any income rises such as private pension incomes, or workplace pensions.
Between 2011 and 2022, incomes of both pensioners and those of working age increased by 12-13 per cent, but over the same period, incomes among the poorest 10 per cent of pensioners only increased by five per cent.
The gap between poorer pensioners and those on average incomes has widened, according to the research, funded by the Joseph Rowntree Foundation (JRF).
Anna Henry, a research economist at the IFS, said: “Reductions in pensioner poverty seen before 2011 have gradually gone into reverse.
12.2 million households don’t have enough pension savings for a moderate living standard, but more than half of them have more than enough savings to boost their pensionGETTY“The new Government will need to focus on current and future challenges for pensioner incomes, especially those of low-income pensioners, and not assume that everything will always be getting better.”
Becky O’Connor. director of Public Affairs at PensionBee is encouraging Britons not to fear as they approach retirement.
“It’s never too late to take charge of your pension savings, regardless of your retirement ambitions or age,” she said.
The pensions expert gave her top tips to help people effectively plan for their retirement, and boost their pensions by over £10,000.
Consider consolidating pensions
She explained this helps people assess if they’re on track for the lifestyle they want in retirement, as well as reduce the burden of monitoring numerous pension accounts.
O’Connor warned: “Unfortunately, it can be easier to lose track of old pensions than you may think as almost one in 10 workers believe they’ve lost a pension pot worth more than £10,000 during the course of their career.”
Increase pension contributions by one to two per cent where possible
Even a small increase can make a difference over time and the power of compound interest means the earlier and more people save, the more their money will grow.
O’Connor explained that regularly reviewing finances is a good way to check when and if people can gradually increase their contributions, especially after pay raises or reductions in other expenses.
Her team at PensionBee recently found that if someone contributed an extra £2 a week into their pension from the age of 18 until they retire at 67, they could boost their eventual pension pot by an extra £9,958.
Regularly review where your pension is invested:
O’Connor continued: “Different investment options carry varying levels of risk and potential returns. As you get closer to retirement, you may want to shift your investments to lower-risk options to protect your savings.
“Conversely, when you’re younger, you may opt for higher-risk investments with the potential for higher returns.”
Consider putting your pay rise in your pension
Those lucky enough to get a pay rise and have the money to spare could put it in their pension to reap the benefits later on.
PensionBee analysis found that a 40-year-old who is on an average salary of £40,000 and already has a pension worth £40,000 could have a pension pot worth £345,988 by the average retirement age of 67 if they paid in a steady 15 per cent of their salary every year into their pension from this age.
If they received a pay rise of two per cent a year from age 40 to 50, their eventual pension pot at age 67 would be £355,102 – about £9,000 higher.
Delaying the state pension age
O’Connor concluded: “If you don’t need to access your State Pension straight away, you may want to consider delaying it.
“Your State Pension will increase by one per cent for every nine weeks you delay it, which works out to just under 5.8 per cent for every full year you put off claiming.
“For example, if your starting weekly State Pension was £221.20, it would increase to £234.02 a week if you delayed it for a year.”
A DWP spokesperson: “Ensuring a better deal for the pensioners of today and tomorrow is a priority for this government. We have committed to the Triple Lock and are promoting Pension Credit and its benefits such as help with heating costs to protect pensioners on the lowest incomes.”