Four ways to boost your pension in 2022 – you could need £20,800 a year for retirement

A key benefit of pension saving is that it will snowball over a long period of time to create a potentially sizeable pot. Pension saving uses compound interest – where a person gains interest on previously earned interest. But it can often be difficult to save, sacrificing money now for a benefit in the long-run.

There are, however, ways a person can boost their pension pot to ensure a happy retirement – but where does one begin?

To start, it will be important to determine how much one actually needs for their retirement.

While this can evidently vary depending on circumstances, there are general rules of thumb to bear in mind.

Recent research by the Pensions and Lifetime Savings Association suggested a single pensioner would need a pension income of £10,900 a year to enjoy a minimum retirement living standard.

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Indeed, a couple would need some £16,700 per year simply to get by in their retirement years.

For a moderate retirement living standard, the PLSA states single people need at least £20,800 a year, rising to £36,000 for couples. 

However, many will have other, more lofty goals in retirement – whether it is travelling the world, taking up a new hobby or undertaking more leisure activities.

This will all require further funds, and as a result, people will need to grow their pot ahead of time if they don’t want to miss out.

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Hargreaves Lansdown has shared four key ways a person can create a healthy pension as they approach retirement. 

Firstly, people are encouraged to make the most of their pension contributions while it is possible.

Tax relief can help, as each time a person adds money to their pension, the Government will automatically add 20 percent as a top up.

Higher earners could benefit from up to 46 percent of tax relief overall, showing the key benefits of saving.

Next, the organisation encourages Britons to make the most of their employer’s contribution rules.

All UK employers must provide a pension for their eligible employees, and pay in at least three percent of any qualifying earnings.

However, many other employers offer pension contribution matching, meaning they will match whatever a person pays in up to a certain percentage.

Hargreaves Lansdown also encourages individuals to learn more about enhanced annuities.

An annuity is one of the only ways to get a guaranteed income in retirement, and people will be able to buy one with all or some of their pension.

If a person develops a health condition before taking one out, they should declare it, as they could get an enhanced annuity – essentially a better deal.

Common conditions such as diabetes, high blood pressure and high cholesterol could qualify. 

People should, however, research this option throughly before embarking upon it.

Finally, people are urged to consider their pension allowances – with the current annual allowance sitting at £40,000 for most people.

If a person used all of this year’s allowance, but none for the previous three tax years, then there is a carry forward rule.

This means people could invest up to an extra £120,00 in their pension in the current tax year.

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