RETIRING seven years early might seem like a distant dream, but with some forward planning and smart decisions, it can be within reach.
While the earliest you can typically access your is 66, you can start drawing savings from a private pension at 55.
From April 2028, these figures respectively.
You usually have several options for private .
You can take a tax-free lump sum of up to 25% and either keep the rest invested, use it to buy an for a guaranteed income, or take it as cash.
You can also combine these options to suit your needs.
However, long before reaching the age where becomes a pressing concern, it's wise to maximise your retirement savings early on.
With prices continuing to soar, many households might be tempted to put off saving for the just to afford essentials.
But opting not to prepare could be a costly mistake when you decide to call it quits in the working world.
We've outlined five simple you can take today to help secure a comfortable retirement eleven years ahead of schedule.
INCREASE CONTRIBUTIONS
The simplest way to is to save more.
The earlier you start contributing to your pension, the more you'll accumulate over time, thanks to compound growth.
Robert Cochran, retirement expert at Scottish Widows, said: “Most people who are working full time and aged between 22 and 64 will be automatically enrolled into a workplace pension.
“Both you and your employer pay into this pot, and you get tax relief on the contributions you make.”
Basic-rate taxpayers receive 20% tax relief, meaning that for every £800 paid into a pension, the government contributes an additional £200.
Higher-rate taxpayers can claim up to 40% tax relief, turning a £600 contribution into £1,000.
Under the current rules, your employer should contribute a minimum of 3% and you contribute 4% of your salary.
However, there are ways to up both these numbers but it’s key to understand what’s on offer.
Robert said: You can increase your pension contributions at any time you like.
“Some employers will match how much you pay in, so if you up your contribution, so will they.
“Taking the highest matched employer contribution is one of the biggest steps you can take towards achieving early retirement with the added benefit that your tax relief will also increase a triple whammy of more heading into your pot.
“The earlier you do this in your working life, the better, as that money will grow and grow while you go about your daily life.”
SALARY SACRIFICE
Some employers offer salary sacrifice schemes, allowing you to redirect a portion of your salary into your pension in exchange for a reduction in your take-home pay.
These schemes can be particularly beneficial if the salary reduction prevents you from being pushed into a higher tax bracket, though you'll still benefit from paying less tax overall.
Additionally, employers save on national contributions as part of these arrangements and often pass those savings directly into your pension, boosting your retirement pot even further.
Robert said: “Our analysis shows that workers could retire a year early by taking advantage of a benefit offered to anyone with a workplace pension.
“Workers on an average salary of £34,963 a year could retire 12 months earlier than planned simply by opting into a workplace salary sacrifice scheme, also known as salary exchange.
“Speak to your employer and see if it is something they offer and if so, ask them to run you through what it would mean for both your money now, but also your future savings.”
FIND A LOST PENSION
If you've had several over the years, it's likely you've accumulated multiple pension pots – some of which may have been forgotten.
Lost pensions account for the largest share of misplaced financial products in the UK.
Out of an estimated £89billion in lost and forgotten assets, over £64billion is tied up in pensions.
According to Gretel, a service that helps people track down lost accounts, more than 3.3million individuals in the UK have lost or forgotten pensions, with an average value of just over £19,400.
Duncan Stevens, chief executive of Gretel, said: “It's surprisingly easy to lose track of a pension – we change jobs, move house, and our contact details get left behind.
Auto-enrolment means most people will have multiple pensions, but without actively keeping track, these pots can easily go astray.
That pension from a job ten years ago could now be worth thousands, yet too many people risk missing out on money they’ve rightfully earned.
“Our free service helps people trace and recover lost accounts in minutes – putting them back in control of their financial future.”
DON'T FORFEIT TAX RELIEF
If you’re self-employed, you have the option to set up your own defined contribution pension, giving you control over your retirement savings.
Most self-started pensions automatically apply tax relief at the basic rate of 20%, meaning that a £100 contribution will effectively cost you just £80.
However, if you're a higher-rate taxpayer, you'll need to claim additional tax relief beyond the basic rate by either contacting or completing a tax return.
For those paying 40% , a £100 pension contribution could cost as little as £60 after tax relief.
You’re entitled to receive tax relief on your pension contributions every tax year until you reach the age of 75.
That's provided you don’t contribute more than your annual earnings and your total contributions stay within the annual allowance, which is £60,000 for most individuals.
Robert said: “If you are self-employed, you still get tax relief on any payments into a pension.
“So, take advantage of that free money, and open a personal pension if you don’t have one already.
“And remember you can use your pension to reduce your tax bill as well.”
BOOST YOUR STATE PENSION
The state pension forms a crucial foundation of retirement income, so ensuring you receive the maximum amount is vital.
Robert said: “While you can't access your state pension until age 66 (or 67 by March 2028), you should check your entitlement.
“The new full state pension is currently £230.25 per week.
“Knowing that you will have this money kicking in from the time you reach your sixties can help with planning how much you need to save to stop working early.”
To qualify for any state pension, you need a minimum of 10 years of contributions.
To receive the full state pension – currently worth £230.25 per week or £11,976 per year – you'll need 35 years of NI contributions.
However, some individuals may receive less than the full amount if they have gaps in their NI record due to various circumstances.
You can check for any gaps in your record by visiting gov.uk/check-state-pension.
If you were eligible for certain such as or , during where gaps in your National Insurance record occurred, you may be able to backdate a claim to receive national insurance credits at no cost, allowing you to fill these gaps for free.
You also have the option to pay voluntary national insurance contributions (NICs) to fill any gaps in your record, which could increase your state pension and provide you with more income during retirement.
However, it’s essential to get in touch with the Department for Work and Pensions (DWP) before making any payments, as they can confirm whether paying voluntary NICs will genuinely enhance your state pension entitlement.
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