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Look into your future – how to fund your ideal retirement

5 minute read

Taking a last-minute approach with saving for retirement is risky – we show you the way to handle pension planning.

The value of investments can fall as well as rise and you could get back less than you invest. If you’re not sure about investing, seek professional independent advice. Barclays does not offer tax advice and the article below does not constitute advice.

Getting things done at the last minute works when it comes to having the car MOT’d on the deadline day, securing contents insurance as you get the keys to a new place, and calling on the services of Deliveroo when you’re hosting a dinner party you’re too busy to cook for.

But when it comes to saving for retirement that last-minute approach isn’t an option if you want a comfortable lifestyle when you quit the workforce.

While your retirement might still be decades away, it’s important to plan ahead so you don’t find out there’s a big shortfall when it’s too late to do anything about it. The earlier you identify any shortfall, the better.

You might be feeling safe in the knowledge that you’re contributing to your workplace pension each month and building up your state pension with every year of employment.

But these steps alone may not be enough to get you the sum you might need to do all the things you want to do in retirement.

You could be retired for 30 years or so, which makes it worth prepping for – and it’s never too early to start. Here are five ways to ensure you’re in control of your pension savings:

1. Review as you go

When it comes to retirement planning, it’s crucial to take an active interest in pension savings and stay on top of your retirement pot as you go along. Letting your pension build up for years on end and simply hoping for the best won’t work.

If you’ve no idea what you have saved so far, round up all your pension schemes and review the total value. If you’ve had a few jobs along the way, then you’ll likely have a number of pensions in your name. The value will change between now and retirement, hopefully rising thanks to extra contributions and investment growth, of course. But it’s a good starting point that you can build on.

Think about what you might realistically need in retirement and set yourself some goals.

2. Inspect your contribution levels

The default amount paid into your work pension might be the minimum amount required by law, which is 5% from you and 3% from your employer. If you want to boost your retirement savings, you could speak to your HR department to see if any raising of your contribution would also lead to a bigger contribution from your employer – or you may be able to do this yourself online if you have a company benefits portal.

You could also look to contribute to a personal pension such as a self-invested personal pension (SIPP) to top up your pension savings if you can afford to do so. A SIPP offers access to thousands of investment choices including shares, funds, Exchange Traded Funds (ETFs) and more, allowing you to build the portfolio that suits you.

Remind yourself that saving in a pension is tax efficient because you get tax relief on contributions (up to a certain point), and because money invested in a pension grows free of Capital Gains Tax and Income Tax, which will enable your savings to grow faster.

3. Make sure you claim tax relief

You receive tax relief on pension contributions, with the amount depending on your income tax bracket. You'll typically get 20% paid by HM Revenue & Customs, and those who pay income tax at a higher or additional rate can claim additional relief on a self-assessment tax return to bring the total relief to either 40% or 45%.

However, some of the UK’s highest earners have failed in the past to reclaim that tax back, via a self-assessment return. According to official data,1 workers left £1.3 billion of unclaimed pension tax relief between 2016/17 and 2020/21 alone.

It is possible to claim back tax from the last three tax years if you haven't been claiming back via self-assessment.

However, if you make contributions via salary sacrifice through your employer then you may not need to claim additional tax relief.

Making extra pension contributions can potentially lower your tax bill, but only if you complete that all-important tax return.

4. Evaluate your investment selection

Check how your pensions are invested, as a big part of your grand total at retirement will depend on (successful) investment returns, so it’s important that your money is in the right place.

You may have selected the default investment option when you first became eligible for the pension scheme at work, but it’s important to understand how that default option invests, and if there are any others with more appropriate risk profiles for your life stage and risk appetite. More and more schemes allow you to have access to your pension online and so you may be able to make any changes at the touch of a button.

5. Consider consolidating

Unfortunately, many investors in older schemes might find they are invested poorly or that fees are unnecessarily high. Now is a good a time as any to review all your pension schemes, both personal arrangements and from any previous jobs, and see if they are right for you – or if you could do better.

Some people decide to transfer all their pension pots into one, or at least fewer – known as pension consolidation. There are a number of potential benefits of doing this: it may reduce the amount you pay in fees. It can also give you access to a wider range of investments, and it means you only have one pension account to monitor and keep track of.

However, moving your pensions into one place isn’t always the best option – depending on what it is you’re looking to achieve. Many workplace pension schemes in particular, have very competitive fees, so you won’t necessarily save money by transferring. There may also be valuable guarantees or other benefits you’d be giving up and some pension schemes levy exit fees. It’s therefore important to check all this if pension consolidation is something you’re thinking about, in order to make sure it’s the right thing for you.

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The value of investments can fall as well as rise. You may get back less than you invest. Tax rules can change and their effects on you will depend on your individual circumstances.

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