How to improve your pension income as you approach retirement

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July 01, 2021 - Paul Hubbert

How to improve your pension income as you approach retirement

If you are approaching retirement and you are disappointed with the amount of pension income you’re forecast to receive, there are steps you can take now to boost your retirement income. This applies both to your State Pension entitlement as well as to any personal or workplace pension savings you have.

There are two main actions you can make to reset your retirement income at this point: either save more money or delay your retirement date. Delaying taking your pension income won’t be the right decision for everyone, and should be thought through carefully and discussed with your financial adviser before making a decision.

Delaying taking income from your personal or work based pensions

If you choose to delay your retirement date, you push back taking your income to a later date. This can help to bolster your pension income in a number of ways.

  • If you have a defined contribution pension it allows more time for you to contribute to your pension plan and more time for it to potentially grow, so you might build up more savings by the time you retire. Deferring taking a defined contribution scheme could mean that the fund grows more, but you need to be aware that it could also reduce in value if markets drop.
  • The rate for guaranteed income products (often referred to as annuities) typically increase as you grow older. This means that if you are considering using your pension pot to buy a guaranteed income for life, delaying might mean you’ll get a higher income (as long as overall annuity rates aren’t falling).
  • If you are considering taking a flexible retirement income from any pension pots you have, delaying when you start to draw that money can give you a better chance of making it last for as long as you need to.
  • If you have a defined benefit pension, starting to take your income later could mean you’ll get a higher income when you start to take the money. It could also save you paying tax on that income if, for example, you are still working at that time. You’ll need to think about how much extra you’ll get and how long it might take to regain the income you’ve missed outIt is important to check to see if your pension providers will charge you for changing your retirement date.

Save more into a personal pension before you retire

Your other option is to save more now, either adding to a pension savings account you have now or starting a new one. You could also invest using an ISA: whilst a payment into an ISA does not receive the same tax relief as a pension, it does provide more flexibility on how and when you choose to access the money. It is risky to try to increase your pension pot by investing in higher- growth investments in the run-up to retirement. If the investments fall in value, there might not be time for them to recover before you want to start taking your retirement income.

  • If you have a defined contribution pension, either through your workplace or one you’ve set up for yourself, you might be able to make extra contributions to it. This will help you build up a bigger pot, so when you do retire your income could be higher.
  • Making extra pension contributions in the years before retirement brings an immediate boost in the form of tax relief. There is a limit on how much you can contribute annually while benefiting from tax relief set by the government, called the annual allowance. This annual allowance is currently £40,000 for most people or 100% of your earnings if lower. For some high-earners (with income above £200,000) and those who have taken money from their pension flexibly, the allowance might be lower.
  • It might be possible to contribute more than your annual allowance into your pension and still benefit from tax relief by using unused allowances from up to the three previous tax years.
  • There is also an overall limit to how much you can build up in pension benefits without getting extra tax charges. This is known as the lifetime allowance, and was £1,073,100 for the tax year 2021/22.

Topping up and delaying taking your State Pension

If you reach State Pension age on or after 6 April 2016, you’ll need at least 35 qualifying years of National Insurance contributions to get the full new State Pension of £179.60 a week.

If you have fewer qualifying years, your pension entitlement will be proportionately lower, however you might be able to fill in some gaps in your National Insurance record by making voluntary contributions. If you’re not sure whether you’re on track to get the full basic State Pension, you can check your State Pension forecast on the GOV.UK website. If you want to fill in any gaps in your National Insurance record, you usually have to make the top-up payment within six years of missing the original payment.

You can also delay the date you start taking the State Pension, and this can make a big difference to the level of pension income you receive.

For those who reached State Pension age after 6 April 2016, the new State Pension rules will apply. This means your State Pension will increase by 1% for every nine weeks you defer. This works out as just under 5.8% for every full year. The extra amount is paid with your regular State Pension payment and it may be worth considering if you are likely to continue working after your State Pension age.

If you are considering making changes to your original retirement plan then it is important to speak to an independent financial adviser before making any decisions. Our advisers are able to help you at any stage of pre or post retirement financial planning. To find out more call 0116 269 6311 to get a no-obligation quote, or email


Past performance is not a reliable indicator of future performance.

The value of an investment and the income from it could go down as well as up. The return at the end of the investment period is not guaranteed and you may get back less than you originally invested.