10 steps to building a bigger pension

So, you've worked for 40+ years and you can now retire. Great! This is the time that Captain Hindsight knocks on the door and says “probably should have saved more”.

Beginning early and ensuring that you have kept enough money to one side is a great start in saving for retirement; however, some aspects may not be so obvious. Have a read through our top 10 tips on saving for retirement.

1. Start investing early

It goes without saying that the longer you save for something, the more you should have. It isn't difficult maths to work out. If you save £1 in a piggy bank everyday for 70 years, you have £25,550 at the end of the 70 years. 

However one of the first things we need to think about when saving - is inflation. What are your savings going to be worth in the future? £25,550 is still going to be £25,550, but what is its buying potential?

To try and counteract the impact of inflation, it is a good idea to understand compound interest.

2. Consolidate – don't lose your pensions when you switch jobs

In most cases when you change jobs, you keep any pension pots that you have built up. So, if your employer offers a pension, it normally makes sense to join. Don't opt out of your auto-enrolment schemes – it's effectively free money from your employer. How often does that happen?

It is unlikely that you will have only one employer throughout your lifetime, however, so it could be tricky to keep track of the different policies you hold. Consolidating all your pensions in one place can make it a lot easier to keep an eye on charges, but also where your money is invested. Remember to check that you won't lose any guarantees or benefits by transferring, and always check if there are transfer out charges. 

The government offer a free pension tracing service 

3. Contribute to your pension

Whether you prefer to invest monthly or on a lump sum basis, remember to actually save into your pension. It is all well and good picking funds that perform well, but the best way to make a pot grow is to add money to it. The amount you save depends entirely on what you can afford, but the more you save now, the more you will have in retirement.

Invest with Chelsea today!

4. Save for a family member

The annual allowance for an individual is based on how much they have earned in that tax year, but did you know that someone who is a non-earner can also save into a pension.

The amount a person will receive as a state pension is entirely based on their national insurance contributions through their working life. But what about those individuals that take time off to raise a family? If your spouse has done so, why not save into a personal pension for them, so they are not disadvantaged in retirement? Please be aware that to open a pension with Chelsea the individual must be over 18. 

5. Make regular checks on your pension

Monitoring your pension is hugely important, particularly when investing in funds. By monitoring where you are invested you can ensure that you are diversified against any changes in the markets. Someone who has a long time until they retire may be willing to take more risk, as their funds will have longer to hopefully outperform over the long term, despite any short-term dips.

Someone who is due to retire in the next 5-10 years may want to be in less volatile funds, so that their savings have less chance of being damaged by any short-term dips in the relevant markets.

Remember, all funds are subject to risk.

6. You've got five years to claim tax relief

All UK residents under 75 receive a minimum of 20% tax relief when they contribute to a pension. When investing through Chelsea, this is automatically reclaimed and added to your investment. For example, if you were to invest £800 into your pension, £200 would be added by the government, making your total contribution £1,000 for that tax year.

However, if you are a higher rate or additional rate tax payer, you can claim the extra back through your tax return. Say you pay 40% tax, the extra 20% can be reclaimed, meaning  that your £1,000 contribution is now costing you only £600.

Many people are missing out on these savings. If this sounds familiar – don't worry! You can write to your local tax office up to four years after the year you contributed to reclaim the missed tax relief. You will usually receive a cheque, or have your next tax bill reduced.

7. You don't have to wait

Many people think that you have to take your pension on the day you retire, and whilst some will wait until then, new flexibilities mean that you can access the money from 55 (57 from 2028).

Whether you decide to take the money at 55 or leave the money until you retire, remember that a pension may need to last throughout your retirement, which could be 30 years or more. That is nearly as long as some people's working life!

• 25% of the pension is usually tax-free with the rest being taxed as income. Be careful to not fall into higher tax brackets by taking out too much at once and paying more tax than you need to. 
• Once you have accessed income from your pension, future contribution may be capped. 
• The government has an impartial service called PensionWise, which offers free guidance on your retirement options. They can be contacted on 0800 138 3944.

8. You can keep paying into your pension after you retire

Although the contribution rules may change, just because you have retired does not mean you have to stop contributing to your pension completely. Up to the age of 75 you can continue to receive tax relief on contributions, depending on your circumstances. 

9. Pensions are usually free from inheritance tax

When you die, your pension can be passed on to your loved ones, tax efficiently.

*beneficiaries' marginal rate of tax

If you already have a pension in place, check that you have completed an expression of wish form so that the provider knows where you want your pension to be passed upon your death.

Chelsea do not charge for processing probate.

10. Invest with Chelsea

What we offer:

• 0% set-up charge
• 0% initial charge on funds
• Access to over 2,500 funds
• Fund research 
• Competitive service and platform charges
• Free transfers in – we can help with transfer out charges if you are moving to us
• Free telephone dealing
• Free switching online, by post and on the telephone
• Access to VT Chelsea Managed Funds
• Twice-yearly statement with unbiased and expert research commentary
• Dedicated Chelsea pensions administrator
• Access to tax-free cash from 55
• 0% charge for processing probate

Charges
Many providers offer a service that can look cheap on face value but has extra costs added on top, particularly for things like statements and telephone dealing. At Chelsea we charge the following:

0.4% annual service charge (taken monthly)
0.2% annual platform charge (taken monthly)
0.75% typical annual fund management charge
Competitive drawdown charges.

We have no 'hidden' charges. Should you wish to discuss transferring to Chelsea, please to contact us in the office.

Discharge forms
When transferring you may be required to obtain a discharge form from your current provider.

Once you have transferred
Once you have transferred your pension cash, don't forget to invest the money from the trading account and to continue saving. We can set up a regular contribution to your pension so that money is taken, and invested, on a monthly basis. Monthly investing can be a great way to invest in the stock market, without putting all your capital at risk in one go.

Some investors know exactly how they want to invest their pension, others don't. For both parties we have our research centre, along with our VT Chelsea Managed Funds and access to FundCalibre.

For more details please complete our quick and simple questionnaire. Alternatively, please email us at info@chelseafs.co.uk or you can call us on 020 7384 7300.