If you are 50 now, you still have 17 years until you reach state pension age, so there is time to make a start on pension saving. The state pension age is currently rising to 67. Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, estimates that contributing £300 per month to a pension could build to around £96,000 in your pension by the time you reach state pension age. This is because any savings you can make will benefit from investment compounding. Smaller amounts paid into your pension will make a difference too.
Get free money from your employer
You must be automatically enrolled into a workplace pension if you are aged between 22 and the state pension age, and earn more than £10,000 a year. You can choose to opt in if you are below this threshold. Not only do you, as an employee, have to contribute to your pension, but your boss does too. By law, a worker has to pay in a minimum of 5% of their qualifying earnings and the employer has to pay in 3%. You can choose to contribute more than these amounts. Ms Morrissey said: "If you can be enrolled into a workplace pension, then your employer will contribute too, which can also make a big difference."
Make the most of pension tax relief
Pension tax relief is a government top-up that refunds the Income Tax you paid on money you save into a pension. If you are a basic rate taxpayer, it means for every £80 you pay into your pension, the Government adds £20 in tax relief, giving you a total saving into your pension of £100. If you are a higher rate 40% taxpayer, the net cost of a £100 pot is reduced to £60. You receive the automatic 20% basic relief, then you have to claim the extra 20% back.
Sacrifice your salary for a pensions boost
Salary sacrifice can be an efficient way to boost your pension and cut your tax bill. This is where you agree to exchange part of your gross salary for a non-cash benefit, such as payments into a pension scheme. As your gross salary is lower, it means less of your income is subject to Income Tax and National Insurance, so your tax bill is lower. Your employer also ends up paying less National Insurance. But the rules for salary sacrifice are changing from April 2029. From this date, only the first £2,000 of annual employee pension salary sacrifice will be exempt from National Insurance.
Check for lost pensions
It is worth checking whether you have a pension from the past that you’ve forgotten about. There are an estimated 3.3 million lost pension pots in the UK, with a combined value of £31.1 billion, according to the Pensions Policy Institute. Ms Morrissey said: "It may be the case that once you left the company you didn’t keep your contact details up to date so stopped receiving paperwork. That small pension from twenty years back could have grown into something much more substantial." If you think you’ve lost a pension, you can track it down by using the GOV.UK Pension Tracing Service. The service can’t tell you if you have a pension, but it can give you contact details. There will also soon be a new Pensions Dashboard which will allow people to view all their pension savings in one place. This is expected to go live next year.
Freebies and help for over-60s
If you are already in retirement age, it is worth knowing what help is out there if you're on a low income. Free NHS prescriptions are free if you are aged 60 or over in England. The current NHS prescription charge in England is £9.90 per item. NHS prescriptions are free in Wales, Scotland and Northern Ireland. Free NHS eye tests are available for people aged 60 and over in England and Wales. Eye tests are free in Scotland. You get free dental check-ups in England if you claim the guarantee credit part of Pension Credit. It costs £27.40 for a standard NHS dental check-up. Over-60s get free dental check-ups in Wales, while in Scotland, dental check-ups are free for all. Free TV licences are available if you claim Pension Credit and are aged 75 or over. It costs £180 for a TV licence. You get a free bus pass in England when you reach state pension age. The state pension age is 66 for men and women but is rising to 67. Or if you live in London, you can travel free on buses, tubes and other transport when you turn 60. You get a free bus pass if you are over 60 in Wales, Scotland and Northern Ireland.
Benefits for pensioners
Attendance Allowance is awarded to people over state pension age who need extra help or supervision because of a disability or illness. This is worth £76.70 a week if you need help or supervision during the day, or supervision at night, or £114.60 a week if you need help or supervision throughout both day and night, or if you are nearing the end of your life. Pension Credit, which tops up your weekly income to £238 if you are single, or to £363.25 if you are in a couple. Winter Fuel Payments are worth up to £300. These are issued to everyone over state pension age, though if you earn over £35,000, the money will be claimed back by HMRC through the tax system. There is also the Warm Home Discount, which is worth £150 off your electricity bill and is available to people on Pension Credit or on a low income.
'A pension was the last thing on my mind'
Saving into a pension often gets put off when retirement feels a long time away, or if the cost of living is eating into your spare cash. Being self-employed and having irregular income for most of her working life means Tracey Ford, 52, has not saved into a pension in 30 years. But this is the year she plans on changing this. Having retrained as a wedding and funeral celebrant, Tracey, from Johnstone in Scotland, now has bookings in the diary for the next two years. This means she has much more room to plan her future finances, including her retirement pot. She said: "It was the last thing on my mind because you worked week to week, month to month. There had always been other priorities." Tracey is far from alone. Around 18 million people are not saving into a pension at all, despite nearly half of them being in work, according to a report by the Pensions Commission. Meanwhile, separate research by Scottish Widows shows 63% of people have done little or no research into retirement planning. But knowing how much you will really need later in life can also be tricky. Pensions UK estimates a single person now needs £13,900 a year for a minimum retirement living standard, or £22,500 for a couple. This would cover your basic needs, with a little left over for fun. For a comfortable retirement, which would include holidays abroad and more spare income to do the things you enjoy, this rises to £45,400 a year for a single person, or £62,700 for a couple. If you are in your 50s and worried about your retirement, the good news is that it is never too late to start saving. Tracey plans to use some savings to start a private pension later this year. She has a small company pension from when she worked for an insurance company in her 20s and she knows this alone is not enough to see her through retirement. Tracey said: "In the current financial climate we’re in at the moment, I think it is even more sensible to get some sort of pension in place."
