Pension income needed to retire jumps-is your pension on track? tips from Sussex financial planner

The figures compiled by the pensions industry body calculate the cost of a basic, moderate and comfortable retirement for individuals and couples, excluding housing costs and after tax.

With this significant jump it has never been more important to make sure your pension pot is on track.

Increase pension contributions

One way to increase your pension is to pay more money in. The earlier you start paying into a pension, the more time your money has to build and grow. It’s usually a good idea to pay more into your pension, as the tax relief is generous and will give your savings an immediate boost. You could also pay into a personal pension as well as any work scheme, as long as you’re happy not being able to access until your 55 or 57 from 2028.

Use salary sacrifice

Your employer may decide to give you the option to make pension contributions through a salary-sacrifice scheme. This is where you give up part of your pay, bonus, and in return your company puts the sum ‘sacrificed’ into your pension along with its own contribution to the scheme. The benefit of this arrangement is that it reduces your overall gross salary. This in turn reduces the amount you pay in income tax and national insurance. Your employer will also pay lower national insurance contributions and it may pass this saving onto your pension, giving it an extra boost.

Review your pensions

If you have worked for different employers, it’s likely you will have amassed a number of different pension pots. If you want to know if they are still cost effective and meeting your objectives, you should take regulated financial advice to understand this and whether the existing pensions have any valuable benefits attached to them.

Check what funds your pension is invested in

The majority of schemes allow you to check online where your money is invested and how your investments are performing. If you are paying into a pension through your employer, you are likely to be invested in the default fund. This offers the advantages that your money is invested straight away in assets such as shares, and that a manager will look after your investments. However, default funds are designed for the needs of the average scheme member – not the individual – and you don’t choose the assets, sectors or countries where your money is invested.

Depending on factors such as your investment principles, age and attitude to risk, you may find that the default option is not suitable for you. There will be other funds to choose from in a workplace scheme and these are worth considering. For those saving into a private pension, the same principles apply, so check your investments are diversified across different asset classes and take account of your timeframe to retirement.