Rachel Reeves is ignoring critics to plot ‘double whammy’ stealth tax pension Budget raid set to cost you tens of thousands… Act now before it’s too late

After a lifetime of hard work and decades of diligently saving into a pension, a comfortable retirement is the least you would expect. But stark figures from the Government warn that 43 per cent of workers are not saving enough for their later years.

An estimated 15 million workers are not setting enough aside to guarantee themselves an adequate lifestyle when they stop working, according to research by the Department for Work and Pensions.

Saving for retirement could get even harder if the Chancellor launches a tax raid on pensions in the Budget this week.

The good news is that it is not too late to take action. Whether you are decades or days from retirement, there are simple steps you can take to boost your pension and secure your financial future.

Give yourself a pension health check

Before you make a plan to boost savings, take stock of where you have got to so far.

Get all your pension paperwork together, tot up how much you have in each pot and where the accounts are.

Your latest statements should forecast how much your pot with your employer could be worth by retirement age.

Factor in other assets such as Individual Savings Accounts (Isas), investments and income, perhaps from a buy-to-let.

Free online pension calculators can help determine how much you need to save to reach your goals and live comfortably in retirement. You input your incomings and outgoings and lifestyle expectations and the tool will forecast whether you are on track.

One free calculator is offered by the Government-backed Money Helper website. To use it go to moneyhelper.org.uk/en/pensions-and-retirement/pensions-basics/pension-calculator.

Consider seeking professional advice. Over-50s who have a

modern workplace pension in the private sector, called a defined contribution pension, can get a free appointment with the Government’s Pension Wise service. Go to: moneyhelper.org.uk.

Track down any lost pots

The Pension Policy Institute estimates that there are 3.3 million lost pension pots, worth a combined £31.1 billion. This means the average lost pot is worth £9,470, however this rises to £13,620 for someone aged between 55 and 75.

Susan Hope, retirement expert at life insurer Scottish Widows, says: ‘Based on the average value, not tracking down yours is equivalent to working for free for 65 days a year – and for over-55s, it is equivalent to 92 days.’

Despite that, some 66 per cent of people surveyed by Standard Life said they had never tried to track down a lost pot.

If you think you may have lost track of a pension, dig out old paperwork to see where your savings are. And contact previous employers to find out about their pension scheme details.

If the company no longer exists, or you are unable to contact them, use the Government’s free Pension Tracing Service, a database of pension contact details.

Consolidating your pots in one place can make it easier to keep track of your savings.

However, anyone with a defined benefit pension should take advice first, as these often come with valuable benefits that will be lost if you move your money.

Boost your contributions

Under auto-enrolment, anyone aged between 22 and state pension age earning at least £10,000 a year is automatically signed up to their workplace pension scheme. As a result, more people are saving for retirement than ever before – but most are still not saving enough.

The minimum pension contribution through auto-enrolment is 8 per cent of your salary (5 per cent from you and 3 per cent from your employer). However, estimates suggest that you need to save closer to 15 per cent of your salary for a decent retirement.

Helen Morrissey, head of retirement analysis at financial services company Hargreaves Lansdown, says: ‘Some employers are willing to contribute more than the minimum if you do the same. This is known as the employer match, and can give your retirement planning a significant hike.’

Got a bonus? Invest it tax-free

Rather than boosting your monthly contributions, consider a one-off payment. Funnelling a bonus directly into a pension can often help to avoid a hefty income tax bill too.

A one-off £3,000 bonus put into your pension, which grows at 5 per cent a year could bolster your pot by £4,886 over ten years, and by £7,959 after 20 years, says Maike Currie from online pension consolidation service PensionBee.

‘Had a basic rate taxpayer taken the bonus as pay, they would have ended up with a maximum of £2,160 after income tax and National Insurance,’ she adds.

A pay rise is also a good opportunity to boost your contributions – do it before you get used to having the extra cash in your pocket.

Cut the fees charged on your savings

Charges eat into your returns, so keep them as low as possible.

Fees on newer workplace pensions are capped at 0.75 per cent if you save into the default fund, but older pots may charge more.

Consider moving your money if you think that you are paying too much.

Imagine a saver has three pension pots, each worth £25,000, with annual charges of 1.5 per cent, 1 per cent and 0.75 per cent.

Assuming 5 per cent annual investment growth, after ten years the three pots would have a combined value of £109,608, and after 20 years would have grown to £160,343, according to figures from AJ Bell.

However, if the three pots were consolidated into one account charging a more competitive 0.45 per cent a year, they could be worth £116,780 after ten years, and £181,833 after 20 years – that’s an extra £21,490.

But don’t just chase the lowest fee, warns Lee Cameron of pension group M&G. It’s important to assess the returns you are likely to make on the pension.

He says: ‘An investment that achieves annual growth of 7 per cent but charges 1 per cent will result in a larger pot than one charging 0.5 per cent but growing by 6 per cent.’

Review your investments

Many pension savers are in the ‘default fund’, a generic investment option chosen by their employer. As it is a one-size-fits-all type of pension fund, it is unlikely to be a top performer.

A higher risk option that invests more in the stock market is likely to grow your money faster, particularly for those who are a long way from retirement.

Your investment options will vary depending on your pension provider – some offer a range of ready-made portfolios of differing risk levels, while others let you choose from hundreds of funds.

Watch out for funds using a ‘lifestyling’ strategy. This is where your money is gradually moved out of the stock market and into safer assets such as Government bonds and cash as you near retirement. This may be sensible for some savers close to drawing an income from their pot, but if you plan to work longer or to leave your money invested after retirement, it may not be a good option.

Review your investments at least once a year.

Make full use of allowances

Savers can put up to 100 per cent of their earnings, to a maximum of £60,000, into a pension each financial year while still receiving tax relief. Using up as much of this allowance as you can afford is an effective way to boost your pot.

‘Carry forward’ rules let you make use of unused allowances from the previous three tax years, which can be useful if you have had a windfall or inheritance.

Currie explains: ‘Add up your unused allowance from the previous three tax years, then add it to this year’s to get your total pension contribution limit. You can contribute this amount and still get tax relief.’

Claim the extra tax relief

Higher rate taxpayers get 40 per cent tax relief on pension contributions, but this doesn’t always happen automatically.

There are two ways that tax relief is applied to contributions: net pay, where contributions are taken before you pay tax, and relief at source, where they are made from your post-tax income.

With both, a £100 contribution would still be paid into your pension, but how it is done differs.

Under net pay, a £100 pension contribution costs a higher-rate payer £60. With relief at source, it would cost £80 – the basic rate of 20 per cent tax relief is applied automatically, but you need to claim the extra £20 tax relief you are owed through self-assessment.

A £100 monthly contribution could grow to £45,250 over 20 years, assuming 7 per cent annual growth and charges of 1 per cent.

Using the additional tax relief to top-up your contributions could add another £11,300 to the pot, says Cameron.

Claire Moffat, tax and pensions expert at mutual life, pensions and investment company Royal London, adds: ‘You can claim tax relief for the last four years, so it’s worth checking if you’ve missed out.’

To check how your tax relief is paid, have a look at your payslips or you can ask your employer or pension provider.

Top up your state pension

To GET the full state pension, you need 35 years of qualifying National Insurance contributions – and you need at least ten years to get any state pension at all.

Reasons you might have gaps in your National Insurance record include: if you were a low earner; if you were unemployed and not claiming benefits; or if you took a career break to raise children or care for relatives.

You can fill in missing years to boost your entitlement. The costs vary but, for example, filling in contributions for the entirety of the 2024-25 financial year – that is if you had made no contributions at all – would cost you £907.30 and boost your state pension by £6.32 a week – or £329 a year.

In other words you would recoup this outlay within three years.

Check your National Insurance record on the gov.uk website. It is usually possible to fill in the past six tax years.

Speak to the Future Pensions Centre (0800 731 0175) first though – it can advise whether making a payment will benefit you.

Keep allowances in the family

Spouses can help each other so no one gets left behind. You can pay up to £2,880 a year into a pension for a non-earner, which gets topped up to £3,600 with tax relief.

This can be particularly important for women, who typically under-save compared with men and are more likely to take career breaks. Hope says: ‘A five-year break at age 35 can leave women almost £70,000 worse off in retirement, so continuing to contribute even small sums helps.’

Work for longer and defer payments…

State pension age is 66, rising to 67 by 2028, but you don’t have to take the payment straight away. For each year you defer, the payment rises by almost 6 per cent.

The new full state pension is £221.20 a week (or £11,973 a year), so waiting one year would add £665 a year for life. A basic rate taxpayer would need to live to 82 to see a net benefit from a one-year deferral, and 86 for a five-year deferral, says Moffat.

… or Consider a career change

Some employers are more generous than others and, as retirement saving moves up your priority list, you could consider targeting a new workplace that offers greater pension perks.

Public sector pensions are known for being especially generous. Teachers receive employer contributions of more than 28 per cent. For the NHS it is 23.7 per cent.