MAXIMISE YOUR Retirement income

If you’re retiring this year, you can expect to live on £18,100 a year, £600 lower than 2008*. Sarah Jagger shares her tips to help boost future pension funds

1 WORK OUT HOW MUCH YOU NEED

Broadly speaking, you should be able to live off 70 per cent of your working income without feeling financially uncomfortable. Saving that much can be a challenge, even including the State Pension, says Karen Barrett at unbiased.co.uk. “Try the 12.5 per cent rule; if you can save this proportion of your monthly income into a pension, you should be on course.” Get a clearer picture of how much money you need with an online calculator such as retiready.co.uk/retirement-income-planner. html. Get a State Pension forecast by calling the Future Pensions Centre helpline on 0345 3000 168 or visit www.gov.uk/checkstate-pension.

2 KEEP PAYING INTO YOUR PENSION

Pension contributions are the best way to save for retirement. Pay as much into your pension as you can afford. Dependent on your taxable income, you can receive a boost from the Government in the form of tax relief on every pound you save in a pension. If you pay £100 into it, you’ll receive tax relief of £25, turning that £100 into £125.

3 PAY OFF YOUR DEBTS

Getting on top of debt is important as you near retirement. Hopefully you will have paid off, or will be close to paying off, your mortgage. If you have other debts such as credit cards or loans, try to pay these off as soon as you can, ideally before you stop working. For help getting out of debt, contact your local Citizens Advice Service, or visit www.citizensadvice.org.uk or call the Money Advice Service on 0800 138 7777, www.moneyadviceservice.org.uk.

4 GET THE BEST RETURN ON YOUR PENSION

Most workplace pensions are invested in default funds which are designed to suit everyone – which in practice means that they suit almost no-one! Speak to an independent financial adviser who can look at the alternative funds offered by your workplace scheme and choose the one that suits your circumstances and time of life – it could make a huge difference to your pension pot. Consider switching older pensions to a new provider, too. “Many older pensions take a big chunk of your growth away with their costs,” says Bob Stark at Portafina. “Modern technology means newer pensions are cheaper to run, which in turn means you get the maximum benefit from your investments.”

5 MAKE TAX MORE FRIENDLY

Make the most of your tax-free allowances, tax bands and tax-friendly savings such as ISAs. The less tax you pay the more of your money you can keep for your retirement. Non-earners can contribute £2,880 a year to their pension and receive £720 in tax relief, boosting it to £3,600. Marriage allowance allows those where one partner earns less than £11,500 to transfer £1,150 of their personal allowance to their spouse. This reduces their tax by up to £230 in the tax year 2017/18. If you were eligible for Marriage Allowance in the 2016/2017 tax year, your claim can be backdated to April 6, 2015 and reduce the tax paid by up to £432. A higher-earning spouse should move personal or jointly-held cash into a lowerearning spouse’s name. A higher rate taxpayer with cash savings of £100,000, earning interest of 2.5% would pay £1,000 in tax. Moving part or all to a non-tax payer could reduce this to £0. Use ISA allowances, (£15,240 a year, £20,000 from April 6), to build up tax-free income.