Tips to boost your pension pot

James Daley - Money expert and Founder of Fairer Finance
Last updated 24^th April 2024
8 min read

If you’re approaching retirement, it’s time to start thinking about how much income you’re going to have when you get there, and how much you’d like to have to maintain your standard of living.

If the sums don’t look as good as you’d like them to, there’s plenty you can do to top up your retirement income.

On this page:

• Calculating your retirement income
• Save more money
• Defer your retirement
• Pick up part time work
• Release the value in your home

Calculating your retirement income

The first thing to do is to work out what you’re on course to have. Start by digging up all the latest statements of any pensions you have – as these should include a pension forecast. If you can’t find the statements, pick up the phone and ask for one.

Your forecast will tell you how much you’re on course to save in your pension based on your current contributions – and will also give you an indication of the kind of income you can expect to generate.

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1. Track down your pensions

Make sure you’ve collected together details of all your occupational pensions. If you’ve worked for lots of different companies over the years, you may have several different pensions – and it’s all too easy to lose track of one or two.

But a pension that you saved into for a few years in your 20s should have multiplied in value, and may now be worth a meaningful sum. If you’ve got a final salary / defined benefit pension, how much you’ll get will depend on how long you were a member of the scheme and your salary when you left the organisation.

If you’re struggling to track down a pension – perhaps because your old employer has changed their name, or you can’t remember the pension provider, there’s a free government pension tracing service(www.gov.uk opens in a new tab) which may be useful.

Once you’ve located your pensions, it is important to update your personal details with the pension provider. For example if your circumstances, name, addresses or bank details have changed, you should let your pension providers know.

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2. Find out your State Pension

You need to have worked for a total of 35 years – or have National Insurance credits for years when you were sick or caring for others – to get the full State Pension, which in 2024/25 is just over £221 a week.

Next, you need to find out how much you’re on track to receive from the government. You can do this using the government’s State Pension checking tool(www.gov.uk opens in a new tab).

Once you’ve got projections for your State Pension and any company pensions, you’ll have an idea of the income you’re likely to be on track to earn in retirement.

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3. Work out your overheads

Next, have a think about what your overheads are likely to be. Perhaps you’re on track to pay off your mortgage before you retire, and you can also count the savings from not having to do the daily commute. But what will you spend more on? Perhaps you have plans to take more holidays, or to socialise more.

If your total income doesn’t look like it’ll keep you in the lifestyle you were hoping for, then there are a few options you can consider to boost your retirement income.

 

Save some more for your pension

Hopefully you’ve been saving into a pension steadily across your working life. But if you haven’t, it’s never too late to start.

You get generous tax relief on all contributions that you make into your pension – and unless you’re self-employed, your employer should be adding some extra to your pot each month as well.

If you live in England, Wales, or Northern Ireland, and earn less than £50,271 a year, you’re a lower rate taxpayer, and you’ll get 20% tax relief on anything you pay into your pension.

That means that for every 80p you pay in, a full £1 will go into your pension. And if you’re a higher earner, you’ll get tax relief at 40%, meaning you only need to pay in 60p to get £1 in your pension. This is subject to maximums.

If you live in Scotland, the tax thresholds are slightly different. In 2024/25, the higher rate tax band kicks in on income over £43,663, and is charged at 42%.

As a very broad rule of thumb, you can halve the age at which you start saving – and that gives you an idea of the percentage of your salary that you need to be stashing away into your pension each month. So if you’re only starting saving for a pension at 50, you need to think about putting as much as 25% of your salary away every month – though some of this can come through tax relief and through contributions from your employer (unless you have a personal pension).

If you’re lucky enough to be a member of a final salary or career average pension scheme, you may be able to pay extra into your pension to increase the amount you’ll get when you retire. These are known as 'additional voluntary contributions' (AVCs).

Less popular today, there’s also an option called 'free standing additional voluntary contributions' (FSAVCs). This option is a scheme offered by insurance companies and is not connected to your employer. The MoneyHelper website(www.moneyhelper.org.uk opens in a new tab) has more information on these defined benefit contribution schemes.

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Defer your retirement

You may have been dreaming of retirement at 55 or 60 since you started work. But if you haven’t saved up enough, it may be worth staying part of the workforce a little longer.

Every extra year that you work is a double boost for your retirement income – as you’re saving more, whilst not drawing down from your pension.

If you defer your State Pension, it increases by 1% for every five weeks that you don’t take it – which works out at a little over 10% a year. So if you delay taking your State Pension for three years, you’ll get almost a third more.

You need to have 35 years of National Insurance contributions to get a full State Pension, and if you haven’t quite got there, you may be able to buy back missed years.

In 2024/25, you’d need to pay in around £907 to buy back each missed year – but this should provide you several hundred pounds of additional State Pension in retirement. You can usually only buy back up to six years of missed contributions.

 

What’s the benefit of working for longer?

If you defer your retirement, the money in your private pension pot should go further too, as you’ll have fewer years left to provide for. If you’re buying an annuity – which turns your pension into an income for life – rates get better the later in life you buy.

While working till you’re 70 may not have been in your plans, if you’re fit and healthy, it can make an enormous difference to how much retirement income you end up with. And it’s worth remembering that when the State Pension was first invented – over 100 years ago – people typically only lived a few years in retirement.

These days, people are typically living 20 years – and those with the greatest longevity can end up spending more time in retirement than they did in the workforce.

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Pick up some part time work

If you can’t stomach carrying on working full time for a few more years, then you could always start drawing your pension, and top it up with some extra part-time income.

You could do this by going part-time in your current job if your employer will let you. Or you could look at something entirely different.

Free from the shackles of your day job, there may be some part-time work which you enjoy – whether it’s becoming a local walking tour guide or doing shifts at the local DIY store.

For many people, retirement continues to be an active time, and the most important priority is being in control of their schedule.

If you don’t want to do anything that requires regular shifts, you could also look at freelance work. There are plenty of flexible jobs that can be done from your home – which allow you to work whenever the mood takes you. For example, you could take online surveys or mystery shopping assignments.

Our how to make money in retirement guide has lot of ideas for making some extra income.

Release the value in your home

If you own your home, another option for increasing your retirement income is to take advantage of some of the value that has built up in your property.

Perhaps the most efficient way to do this is to sell your current home and buy a cheaper one – either something smaller in the same neighbourhood, or by moving to a cheaper area.

A growing number of people are moving abroad in retirement to countries like Spain or Portugal, where property prices are cheaper and the cost of living is lower too.

Consider equity release

If you don’t want to move house, you could also consider equity release. This is a loan on your property which don’t have to pay back until you die or sell the property.

The main type of equity release is known as a lifetime mortgage – where the interest rolls up and is added to the loan each month. You don’t need to make repayments unless you want to.

SunLife has a helpful guide where you can find out more about how equity release works and the types of schemes available.

If you live in an area where you’ve seen your property price increase significantly, you may be able to release a decent amount from your house, which you can use to top up your retirement income.

It’s important you take independent financial advice if you’re considering equity release.

However you decide to boost your pension pot, make sure you have enough money to live comfortably. You’ll want to enjoy your retirement, and not end up retired and in debt.