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Top tips for better pension investment and boosting your retirement income

Kalila Sangster
·5-min read
Older couple sat at home looking at laptop
Only 32% of Brits know where their pension is invested. Photo: Getty

The state pension age for both men and women will rise to 66 on 6 October.

When the State Pension was introduced in 1948, a 65-year-old could expect to spend 13.5 years in receipt of it – about 23% of their adult life, according to a government analysis. This age-span has been increasing ever since.

Latest projections from the Office for National Statistics show that the number of people over state pension age in the UK is expected to grow by a third between 2017 and 2042, from 12.4 million in 2017 to 16.9 million in 2042.

“More than a decade of rising pension ages has made an enormous difference to people’s working lives. However, so far, it hasn’t made enough difference to their pensions,” said Sarah Coles, personal finance analyst at Hargreaves Lansdown.

“We don’t know how much we’ve saved, or where it’s invested, and two thirds of people aren’t confident they’ll be able to afford retirement. Women are in a particularly worrying position, because almost three quarters aren’t sure they can ever afford to stop work.”

READ MORE: Brits unknowingly funding climate change through their pensions

But whatever the circumstances, there are ways you could make a better pension investment and boost your retirement income. Below is what experts at Hargreaves Lansdown say may help you make the most of your pension.

Five steps to better pension investment

Don’t be afraid to admit you don’t know

Going back to basics about what a pension is and how it works can make things a lot clearer. There is plenty of useful resources online, including the Money Advice Service, a government backed service giving free and impartial money advice, and the Pensions Advisory Service, as well as information from pension providers.

If it’s a workplace pension, speak to your employer

Your employer will be able to tell you about your company pension and should have information booklets to explain how it works. If you don’t feel like working your way through written information, ask for a meeting where someone can explain it fully for you.

Check what you’re invested in

If you don’t know where you’re invested, the chances are you’ll be in your scheme’s default fund — because this is where you end up if you haven’t made an active investment choice. Ask for a copy of the default fund factsheet, which will show you the charges you’re paying, and how the investments have grown compared to the average of similar funds.

Work out if your investments are right for you

If you’re in a default fund, it’s likely around two-thirds of your pension will be invested in shares. This gives you the best chance of growing your money. The rest will probably be in bonds and cash which tend to fluctuate in value less.

If you’re under 40 you can consider having a larger proportion of your pension invested in shares. Most pensions will give you some alternative options, so ask for details or take advice to get the right investments for you.

Set a date to review your handiwork

Set a date to look at your progress – it can be helpful to get into the habit of checking up on your pension at least once a year. When you do, check how the funds are doing and if they are still right for your circumstances.

READ MORE: One in three Brits have 'no clue' how their pension works

“If you’re at an earlier stage in your career, the key is putting aside as much as you can afford as early as you can afford to do so. If you have opted out of your workplace pension, or weren’t automatically put into it because you earn less than £10,000, talk to your employer about getting into the scheme. Once you start paying in, they’ll have to do so too — so your efforts will be magnified,” said Coles.

It is also advisable to reassess your retirement choices. The below tips could be helpful.

Five key questions you should ask to get your pension on track

What kind of retirement do I want?

It’s a good idea to ask yourself when and how you plan to retire, and what kind of lifestyle you want to be able to afford.

This will help you work out how much money you need after you retire — and when you need that income to begin.

How much of a lumpsum do I need in order to generate that income?

The experts recommend using an online pension calculator to give you a good general guide as to what you need to save.

How much have I saved so far?

It’s worth looking up the paperwork for any pensions you have, and checking what’s sitting in the pot.

How much do I need to contribute — and for how long — in order to build that lump sum?

Again there are lots of pension calculations online that can help you answer this.

How much do I want my pension investments to grow, and what risk am I prepared to take?

Figuring this out will help you decide on the kinds of investments that should go into your pension portfolio.

READ MORE: UK pensioners lose £30m to scammers

Meanwhile, a survey has found that only 36% of people are confident they’ll ever be able to afford to retire.

Financial uncertainty is affecting women more than men with just 26% of women confident they’ll ever be able to afford to retire, compared with 46% of men.

Just a third of Brits know how much income they’ll need in retirement and only 37% of people have a clear idea of what their pensions are worth, according to the survey by Hargreaves Lansdown.

It also showed that only 32% know where their pension is invested, with the majority confused about what was happening with their cash.