The end of 2021 is almost here and as we head into the New Year, many people will be looking to clean up their finances in the spring to ensure the next 12 months are more prosperous than the previous ones, especially for their credit unions. retirement.
Helen Morrissey, Senior Pensions and Retirement Analyst at Hargreaves Lansdown, says reviewing your future life savings plan is a must to start 2022 on a solid financial footing.
Even the smallest of changes can have a big impact in the long run, like a slight increase in pension contributions that can really add up over time, while the pursuit of a lost pension can potentially increase your retirement savings by. thousands of euros.
Helen explained, “Planning ahead can also save you and your loved ones from unpleasant surprises like unexpected tax burdens or even death benefits paid to a former spouse rather than a current partner. . Taking a little time to update your retirement planning now can make a big difference in the long run.
The top retirement resolutions for 2022 that every investor should adopt
Helen shares her top tips for reviewing your finances and increasing your retirement capital over the next year.
Increase your contributions
It can be tempting to set and forget about pension contributions, but increasing contributions slightly, like when you get a raise or change jobs, can really add up over time.
You may also find that if you increase your contributions, your employer will as well, so it is worth checking that with them.
There are many useful online tools, such as pension calculators, that can show you the potential impact of an additional long-term investment.
Find lost pensions
We are expected to have multiple jobs in our working life, and you could end up with a pension on each of them.
Over time you can lose track of these and that means you won’t get the full pension you are entitled to.
You can find lost pensions using the UK Government’s Pensions Search Service on GOV.UK here.
A recent access to information (FOI) request indicated that the service had received more than 200,000 calls from people trying to track down a lost pension in the past four years.
Think about the consolidation of pensions
Once you have found your lost pensions, it may be a good idea to consolidate them.
Having one or two big pots is easier to follow than several small ones and will make planning for your retirement easier. However, you need to make sure that in doing so you don’t forego valuable benefits like guaranteed annuity rates that can boost your income or expose you to large exit fees – take advice if necessary.
Make the most of your tax breaks
You can contribute up to £ 40,000 per year to your pension and still get tax relief. If you haven’t used up all of your allowances in the last three tax years, you can further increase your contribution through a process called carry forward.
While many people aren’t close to contributing £ 40,000 to their pension per year, this is handy advice that people with a flat-rate income like the self-employed or someone who has recently received an inheritance. could use.
Update your wish expression forms
You will have completed an expression of will form to indicate who you would like to receive your death benefits from when you start your pension.
However, it could be a long time ago and in the meantime you may have divorced, separated or started a new relationship and therefore the person named on the forms may not be the person you want to benefit from.
While administrators / trustees may have the discretion in some cases to award death benefits to someone other than the one named on the form, sometimes they do not. It is best to make sure that they are updated regularly to ensure that your wishes are taken into account should the worst happen.
Check your pension rights
Currently, you need 10 years of national insurance contributions to qualify for a state pension with 35 years needed for the full amount.
State pension is the backbone of people’s retirement planning, so check your entitlements on Check your state pension forecast on the GOV.UK website here.
If you have any gaps to fill, you can buy additional national insurance contributions to make up for the additional years. Each additional year of voluntary contributions to Class 3 national insurance costs around £ 800.
You can find out more and how to pay here.
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If you are entitled to family allowances but do not do so because you are affected by the tax burden of family allowances for high income, then you are missing national insurance contributions which could be used for your state pension. .
Likewise, if the application for child benefit is on behalf of your partner and he works while you are at home looking after the children, he can transfer the national insurance credit to you.
Learn more on the GOV.UK website here.
Grandparents and other family members who have not reached retirement age and are caring for children aged 12 or under so that their parents can return to work are also eligible for credits. national insurance through specified adult child care credits – find out more here.
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