Five top tips to boost retirement planning – and one thing to be careful of

Mar 14, 2023

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3 min read

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Make sure you are making the most of your employer contributions in your workplace pension.
You can contribute the lesser of your annual earnings or £40,000 a year to your pension and receive tax relief.
If you have any left-over annual allowance from the previous three tax years you can also use this to boost what you put into your pension. This is called carry forward.
If you have used up your allowances, then you could boost the retirement prospects of a loved one through a partner or child’s pension.
If you are aged under 40 then a Lifetime ISA could be a good retirement planning option.
If you have already flexibly accessed your money purchase pension or are a high earner you will be hit with restrictions on your annual allowance.

Helen Morrissey, head of retirement analysis at Hargreaves Lansdown:

“We are five weeks away from tax year end, so you still have time to give your retirement planning a real boost. You can put up to £40,000 a year into your pension and if you have any left-over allowances from the three previous tax years you can use them to boost your contribution and make a real difference to how much you end up with in retirement.

If you are in a workplace pension scheme, then it is important to make the most of your employer contribution. Many employers only contribute at auto-enrolment minimum levels (3%) but there are others who are willing to do more if you do too – this is what is known as an employer match. It’s well worth checking to see if your employer offers such a thing and if you have any spare cash boosting what you put in accordingly.

If you have used up your own allowances, then contributing to a loved one’s pension – a partner or a child could be a good option. Up to £2,880 per year can go into to the pension of a child or non-working spouse and they will benefit from tax relief boosting it up to £3,600. It’s a great way of topping up a partner’s pension while they aren’t working or getting a child’s retirement planning off to a flying start.

However, it’s really important not to get tripped up by the various allowances at play which could land you with a tax charge. Very high earners could find they are hit with the tapered annual allowance which can whittle the amount they can put away down to as little as £4,000 per year. Similarly, people who needed to access their money purchase pensions to top up their income during the cost-of-living crisis may find they have triggered the Money Purchase Annual Allowance which again restricts contributions to £4,000 per year. If you bust either of these allowances, you will land yourself with a tax bill.

A LISA could be nicer….

Retirement planning is about more than just pensions and Lifetime ISAs also have a significant role to play. If you are under 40 you can contribute up to £4,000 per year up to the age of 50 and receive a 25% government bonus – this along with investment returns over time can leave you with a healthy sum that can be used alongside or instead of pensions. The ability to access your money early (subject to a penalty) if you really need to may also make it an attractive option especially for groups such as the self-employed. You can also contribute to the LISA of a loved one if you have used up your allowances though you will be unable to open the account on their behalf – they will need to do that themselves. You also need to be comfortable with the fact that once they have received your contribution it is legally theirs.