7 steps to take if your pension is behind schedule

A key goal of financial planning is making sure your pension will support the retirement lifestyle you’ve always envisioned.

So, it can be disheartening to review your pension and realise it might not deliver the income you need at the age you’d hoped. However, there are several course corrections you can make to help you get back on track.

Read on to discover seven practical steps you can take if your pension is behind schedule.

1. Get a clear picture of your standing

The first step to take if your pension is not where you want it to be is to get a clear picture of your current position and how it compares with your target. If you’ve set a specific retirement date and fund size, review your contributions and investment growth to see how far off track you are and investigate the reasons why.

Understanding both where you are and why you’re there is important, as it allows you to make informed adjustments. This may mean increasing contributions, changing your investment strategy, or revisiting your retirement goals.

A financial planner can help you perform a detailed pension review, identify the shortfall, and create a plan that gets you back on course.

2. Trace any pensions you may have lost

It’s not uncommon to have pensions from previous employers that you’ve forgotten about, and many people are affected without even realising it.

Indeed, research reported by Royal London estimates there are around 3.3 million unclaimed pensions in the UK, worth £31.1 billion in total. Tracking one down could give your retirement fund a significant boost.

The government’s Pension Tracing Service can help you locate lost pensions. The system allows you to find the contact details of the scheme’s administrator, so you can check your entitlement and bring those funds back into your retirement plan.

3. Increase your contributions

You may need to increase your contributions to get your retirement fund back on track for your target age.

One way to do this is to raise your monthly payments from your earnings. If you’re employed, this could come with the added bonus of employer matching, which effectively boosts your contributions for free.

Another option is to make lump-sum payments, perhaps from an inheritance, a bonus, or other savings. Pension contributions receive automatic tax relief of 20% (up to the current Annual Allowance of £60,000).

If you’re a higher- or additional-rate taxpayer, you can claim an additional 20% or 25% relief, though you may need to complete a self-assessment tax return. Research from Standard Life found that around £1.3 billion was lost in unclaimed pension relief in the tax years between 2016/17 and 2020/21. You can backdate any unclaimed pension relief by up to four tax years, so it’s important to claim it when you can.

4. Review your investment strategy

One reason your pension may be behind schedule is that your investment strategy no longer suits your circumstances.

For example, many workplace pensions are placed in a default fund, which are typically not the best. As your pension grows, this is likely to have a bigger impact on you.

Moreover, many pensions are in a “lifestyling” strategy. Lifestyling makes changes to your pension investment irrespective of market timing or your personal situation, and gradually shifts your money into lower-risk investments to protect against market volatility. While this can be sensible, it may work against you if it’s a poor time to do so, you’ve delayed your retirement, or you plan to keep your money, as it could limit growth when you still have time to invest for the long term.

A financial planner can review your pension’s current investments, assess whether they still align with your goals and risk tolerance, and recommend adjustments to maximise growth.

5. Check in with your State Pension

If your pension savings are behind schedule, it’s a good idea to check if you’re on track to receive the full State Pension.

To be eligible for the full amount, you need 35 qualifying years of National Insurance contributions (NICs). You can check your record on the UK government website, and if there are gaps, you can make voluntary contributions for up to six tax years.

A financial planner can help you review your expected State Pension, identify any gaps in your record, and decide whether making additional contributions makes sense. They can also explore strategies such as deferring your State Pension to maximise the benefit.

6. Explore alternative income sources

Many people today have more than one stream of income in retirement. This not only helps you to live the retirement you want, but can also improve your overall tax efficiency, ensuring your money lasts longer.

You may also be able to make up for any shortfalls in your pension by supplementing it with alternative income sources in retirement.

This could include:

• ISA savings

• Investments

• Rental income.

A financial planner can work with you to determine which income sources are most suitable for your circumstances, and then create a plan to integrate them with your pension to ensure your income is sufficient.

7. Consider phasing or delaying your retirement

You could also consider delaying or phasing your retirement to help make up the necessary contributions to achieve your ideal retirement lifestyle. Small contributions can make a big difference due to the benefits of compounding.

For example, Pensions Age reports that a 60-year-old with a pension of £200,000 could grow their pot to £211,000 by deferring retirement for one year and continuing contributions of just £200 a month.

By doing this, you not only add a year of contributions, but you also reduce the number of years you’ll need to draw from your pension, which can significantly boost your retirement income.

So, delaying retirement or gradually transitioning out of work can be an effective strategy to increase your retirement income. A financial planner can help you assess the impact of deferral on your pension growth and retirement lifestyle.

Get in touch

If your pension is behind schedule, it’s important to take action to make up for the shortfall.

A financial planner can review your current pension, identify gaps, and create a personalised plan that ensures your pension gets to where it needs to be.

To speak to a financial planner, get in touch.

Email info@mlpwealth.co.uk or call us on 020 8296 1799.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

All information is correct at the time of writing and is subject to change in the future.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.