Five practical tips for boosting your pension

Boosting your pension doesn’t have to mean making big sacrifices, here’s a quick guide to help you grow your pension without changing your lifestyle

Planning for retirement is a critical step toward financial security, yet many of us overlook simple ways to enhance our pension pots.

With long life expectancies and increasing living costs, building a robust pension is more important than ever.

By increasing contributions, securing higher-rate tax relief, reviewing investment choices, using salary sacrifice, and directing pay rises into your pension, you can significantly improve your retirement savings.

This article looks at five practical tips to boost your pension.

1. Increase your pension contributions

One of the most effective ways to boost your pension is to increase your contributions. The more you pay into your pension, the larger your retirement fund will grow, thanks to compound interest over time.

In the UK, workplace pensions often include minimum contribution rates, typically 5% from employees and 3% from employers under auto enrolment rules. However, these default contribution levels may not suffice for a comfortable retirement.

Consider incrementally raising your contributions, even by 1% or 2% annually. For example, if you earn £30,000 and increase your contribution from 5% to 7%, you could add thousands to your pension over a career.

Many employers match additional contributions up to a certain level, so check your scheme’s rules. Use online pension calculators to estimate how small increases can impact your future savings.

Starting early maximises growth, but even mid-career adjustments can make a significant difference.

2. Review your pension investments

Where your pension is invested plays a crucial role in its growth. Many UK workers remain in their workplace pension’s default fund, which may not always deliver optimal returns.

Default funds are often designed for low risk, which can mean lower growth, especially for younger savers with decades until retirement. Underperforming funds can cost you tens of thousands over time – even if you can’t plainly see it.

Request a pension statement to see your fund’s performance and compare it to similar funds using tools like Morningstar or Trustnet.

Look at the asset allocation. Is it heavily weighted in bonds rather than equities? For those far from retirement, a higher equity allocation may offer better long-term growth.

Consider switching to a fund with a stronger track record or a different risk profile but check for exit fees. If unsure, consult a financial adviser to align your investments with your retirement goals and risk tolerance.

3. Use salary sacrifice schemes

Salary sacrifice is a tax-efficient way of boosting your pension.

Instead of receiving part of your salary, you ask your employer to pay it directly into your pension. This reduces your taxable income, saving on income tax and National Insurance contributions (NICs).

For example, if you sacrifice £1,000 of your salary, both you and your employer avoid NICs, and the full amount goes into your pension, often with employer contributions added.

This strategy is particularly beneficial for middle and high earners. However, it may affect benefits like statutory maternity pay or mortgage applications, as it lowers your official salary.

Salary sacrifice can significantly enhance your pension while reducing your tax bill. This is particularly salient for higher earners with young children, who face a significant tax and benefit cliff-edge when they go from earning £99,999 to £100,000.

Check with your employer if they offer salary sacrifice and calculate the savings using a pension calculator. Always ensure the scheme complies with HMRC rules to avoid unexpected tax issues.

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4. Direct pay rises into your pension

When you receive a pay rise, it’s tempting to spend the extra income. However, allocating some or all of it to your pension can go a long way to boosting your pension without impacting your current lifestyle.

For example, if your salary increases by £2,000 annually and you direct half to your pension, you’ll barely notice the difference in take-home pay but will see substantial long-term gains.

This approach works because it prevents lifestyle creep, where spending rises with income. Set up an automatic increase in your pension contributions whenever your salary rises.

Many workplace pensions allow you to adjust contributions easily through payroll. If your employer matches contributions, you could double the impact.

This habit ensures your pension grows in line with your career, keeping your retirement plans on track.

5. Secure higher-rate tax relief

If you’re a higher-rate or additional-rate taxpayer, ensuring you claim higher-rate tax relief is a must.

In the UK, pension contributions receive tax relief at your marginal rate. Basic-rate taxpayers (20%) get relief automatically, but higher-rate (40%) and additional-rate (45%) taxpayers must claim extra relief through a self-assessment tax return or by contacting HMRC.

For instance, a £10,000 contribution costs a higher-rate taxpayer only £6,000 after tax relief, as the government tops up the difference. Failing to claim this relief means missing out on free money for your pension.

Check your tax code and recent payslips to confirm your tax band. If you’ve overpaid tax or haven’t claimed relief, contact HMRC promptly.

Additional considerations for pension planning

Beyond these five tips, regularly review your pension to ensure it aligns with your goals.

Consolidate old pensions from previous jobs to simplify tracking and reduce fees but check for valuable benefits like guaranteed annuity rates before transferring.

Stay informed about pension rules, such as the annual allowance (£60,000 for most in 2025/26).

If you’re self-employed, set up a personal pension and contribute consistently to benefit from tax relief.

Inflation and life changes also affect your pension needs. Use forecasting tools to estimate your retirement income and adjust contributions accordingly.

If you’re nearing retirement, gradually shift investments to lower-risk options to protect your pot.

Seeking professional financial advice can provide clarity, especially for complex situations like defined benefit pensions or tax planning.

Concluding thoughts on boosting your pension

Boosting your pension doesn’t require drastic changes; small, consistent actions can yield significant results.

By increasing contributions, claiming higher-rate tax relief, reviewing investments, using salary sacrifice, and directing pay rises into your pension, you can build a stronger financial future.

Start today by assessing your pension statement and exploring one or two of these strategies. With compound growth and tax advantages, your efforts now will pave the way for a secure and comfortable retirement in the UK.

This article is produced for general informational purposes only. It should not be construed as investment, legal, tax or other forms of financial advice.

If in any doubt about the themes expressed, consider consulting with a regulated financial professional for your own personal situation.

Past performance is no guarantee of future results. Investments can go down as well as up and you may get back less than you started with.

Investments are speculative and can be affected by volatility. Never invest more than you can afford to lose.

For more information visit www.fca.org.uk/investsmart