Here in Edinburgh where I am based at Standard Life’s head office, we are gearing up for our annual “festival”. If you’ve never been, I’d better explain that this is no small scale event, but a cornucopia of different festivals that attracts people and acts from all over the world, with something very special for everyone.
The Edinburgh International Festival brings us opera, ballet and music from international stars; the Fringe showcases top comedy, music, theatre, cabaret, dance, kids shows and events that pop up in every nook and cranny of the city. Then there is the Book Festival which attracts world famous authors and always seems to be oversubscribed; not to mention the Royal Military Tattoo and all the street acts and pavement artists that attract the crowds of tourists.
I’m looking forward to the city coming alive.
But while festival tickets seem great value to me, we all know that a family day out seldom comes cheap. That said, there are lots of free events at the Festival too, and if you’re smart and apply for BBC tickets you could score free tickets to great British classics like Just a Minute.
But what’s all this got to do with pensions you may be wondering? Well, it’s made me think about how you can get more pension for free too. How can you increase your pension pot and provide for a good retirement, without spending any more money than you already are? Is that even possible?
Well, I think the good news is that two important options come to my mind that could improve your situation, that are over and above any tax relief you get on your pension savings. So if you’re finding it hard to save into a pension and really can’t afford to save any more than you currently do, then read on.
First, if you are already saving into a personal pension, and you are employed, then check with your employer to see if you could join a workplace scheme. If you can, it might make sense to switch allegiance. That’s because your employer will add their contributions to whatever you contribute, so without saving any more, you are getting a free top up too. And if you can make your contributions through salary sacrifice – some employers have set up their pension schemes in that way – then it’s much more tax efficient to do so. You may find that you don’t have a workplace pension available, but under new automatic enrolment rules, all employers will need to have a scheme in place by 2018 for eligible jobholders, so chances are you will be able to join one soon.
Of course, that is only a help if you are employed – not self-employed or taking time out as a mum. But there is a second, really important option for absolutely everyone to think about. Have you checked recently to see where your pension funds are invested? Changing investment funds can make a really big difference to how quickly your pension pot grows, without you altering how much you are investing into your pension each month. Of course, part of this comes down to how much risk you are willing to take. But also bear in mind that just like other things in life, like mobile phones and cameras, better more modern funds become available all the time that are not necessarily any higher risk. One thing to look out for are the growing number of risk managed funds, that aim to get the best possible performance for you from a wide range of underlying funds, by taking an overall level of risk that you are comfortable with.
So while your pension may be invested in the Sony Walkman of its day, you could find that there’s an iPod version available that could provide a better performance for a similar level of risk.
Of course, this applies to any stocks and shares ISA investments you have too. So why not visit your pension or ISA provider’s website or contact them to find out how to review your investment funds – you can probably do this online. Before you do so, you might want to think about the level of risk you are comfortable with by taking an independent risk questionnaire.
But as always, remember that the value of an investment can fall as well as rise, and may be worth less than you invested. And if you are at all unsure about what funds to choose, then why not seek professional financial advice.
People can find out more about how pensions work at yourfuturemoney.co.uk and if I’ve whetted your appetite for the Edinburgh Festival too, then why not pop along to Mrs Moneypenny’s clinic where you can enjoy a relaxing and funny approach to finance or enjoy one of the thousands of other shows on offer throughout August.
Oh, and I’ve not quite finished on this free pension idea – next month I think I’ll be writing about a third way you might be able to boost your pension pot for free.
Tax rules and legislation can change and any information provided here is based upon our understanding of law and current HM Revenue & Customs practice.
By Julie Russell, Pensions Expert, Standard Life