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5 simple ways to boost your later-life income in the decade before retirement

As you enter the decade before you retire, you could now be thinking practically about how your financial situation may look after your career ends.

Once you enter retirement, you’ll likely be taking an income from multiple sources, some of which could include:

  • Private pension pots

  • The State Pension

  • Individual Savings Accounts (ISAs)

  • Cash savings accounts

  • Your investment portfolio.

Crucially, preparing your finances across all these areas could put you in a favourable position once you actually retire.

Although it may seem pre-emptive to begin thinking about these factors 10 years before you finish your career, it’s never too early to start planning for a smooth transition into retirement.

So, here are five simple ways to boost your later-life income in the decade before you retire.

1. Prioritise pension contributions

In April 2023, chancellor Jeremy Hunt announced that the tax charge connected with the pensions Lifetime Allowance (LTA) would be removed immediately.

Previously, the LTA limited how much pension wealth an individual could accrue before facing an additional tax penalty of up to 55% upon withdrawal.

Before it was removed, the LTA stood at £1,073,100. Now, savers can place as much as they like into their pensions without triggering an additional tax charge when they take their funds.

At the same time, the chancellor also increased the Annual Allowance – the amount most earners can pay into their pension while receiving tax relief – to £60,000 or your total earnings, whichever is lower.

These two key pension legislation changes provide you with the opportunity to make further tax-efficient pension contributions as you approach retirement.

Indeed, Professional Adviser reports that 59% of higher-rate taxpayers have taken action in light of these changes, including many saying they’ve increased pension contributions by up to £650 a month.

So, as you approach the finish line of your career, it could be worth upping your pension contributions in line with the new Annual Allowance and the absence of an LTA tax charge.

Boosting your pension in the next 10 years could mean you retire with a larger pension pot waiting for you.

2. Make the most of your ISA allowance

ISAs can be used for both cash savings and investing, and are known as “tax wrappers” for the following reasons:

  • Any profits you earn are free from Capital Gains Tax (CGT), unlike profits from shares outside of an ISA

  • Gains made within an ISA are not subject to Income Tax either.

As of the 2023/24 tax year, you can contribute up to £20,000 into the ISA accounts you hold each year – so if you retire in 10 years, there could be a £200,000 savings opportunity waiting for you. Your allowance is divided among your accounts, and some individual contribution restrictions can apply too.

Most importantly, as you approach retirement, making the most of your ISA allowance where possible could put you in good stead for the future.

If you choose a Stocks and Shares ISA, your investments could be left to potentially grow tax-efficiently over a time frame of your choice, and may be ready to withdraw when you need them in retirement.

You can read our insights into the benefits of making the most of tax year allowances on our blog page.

3. Reduce your remaining debts

As you enter later life, living debt-free may become one of your main goals.

If you have a mortgage, choosing to prioritise paying it down as quickly as possible may help you become more financially viable in retirement. Having low or no mortgage payments when you retire could free up valuable income later in life, and may make you feel more secure in the years to come.

Similarly, if you have other debts you wish to pay off, focusing on this goal over the next 10 years might help you feel more confident as you head into retirement.

Figuring out which debts to prioritise, and the time frame over which you can pay them, can be tricky. As such, it may be constructive to consult a financial planner for help with setting realistic repayment goals for the decade to come.

4. Pay voluntary National Insurance contributions

You can normally “buy” National Insurance contributions (NICs) going back just six years.

However, if you have missing years of NICs between 2006 and 2016, including if you were working abroad or had given up work to raise a family, you can now buy NICs for those years.

Doing so can boost your eligibility to receive the full new State Pension, which, if the “triple lock” planned by the government comes into force next April, could provide you with £221.20 a week in retirement.

Happily, the government has extended the deadline for doing so to April 2025. The deadline was previously set for July 2023.

Although the deadline is more than 18 months away, it could be prudent to begin looking into your NI record now.

If you do have gaps in your record between 2006 and 2016 and are not eligible for the full new State Pension, buying voluntary NICs now may increase your later-life income.

5. Create a retirement plan with a financial planner

The transition between working life and retirement can be a difficult adjustment at first.

While you may have only had one or two sources of income throughout your career, you may have a number of income streams in retirement. Each of these may attract a tax bill, including Income Tax and CGT, both of which can be mitigated in many circumstances with the help of a professional.

As such, you could gain more from your savings, pension pot, investments, and State Pension when working with a financial planner. We can assess your sources of later-life income and help form a secure financial plan that takes your goals into account, while working to lessen the tax you could be liable to pay.

To learn more about how we can help plan your dream retirement, email or call us on 0208 882 2979 for more information.

Please note

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only. All contents are based on our understanding of HMRC legislation, which is subject to change.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits.

Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it. Buy-to-let (pure) and commercial mortgages are not regulated by the FCA. Think carefully before securing other debts against your home.

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