Older pension savers urged to not make this one simple but costly mistake | Personal Finance | Finance
Older savers are being urged to take action as pension experts warn that neglecting retirement funds could prove to be a costly mistake. According to advisers, too many people are leaving their pension pots untouched, hoping they will somehow be enough to see them through later life.
However, experts say that without regular reviews and proactive management, many could find themselves facing a significant shortfall. But with the right steps taken now, savers can still turn things around and secure a more comfortable retirement. Dr Ramin Nakisa, managing director at PensionCraft Ltd, warned of the importance of checking the fees charged by their pension providers, as these can eat into the returns you make. He said: “Aim to keep total investment fees below 0.2% annually, which is easy for DIY investors. High fees erode your returns over time, so shop around for low-cost platforms and funds.”
Sharing a few more tips to get the most out of pension savings, Dr Nakisa said: “Use your ISA and SIPP allowances fully. These tax-efficient accounts can significantly boost your retirement savings.”
Individual savings accounts (ISAs) currently allow people to save up to £20,000 tax-free per year. Self-Invested Personal Pensions (SIPPS) allow workers to contribute up to £60,000 per tax year.
When you contribute to your SIPP, you automatically receive 20% tax relief on your contributions. For example, if you contribute £80, it will be increased by an additional £20, resulting in a total of £100. Higher and additional rate taxpayers can receive an extra 20% or 25% tax relief; however, they must claim this through their tax return or by contacting HMRC with details of their pension contributions.
If you are not employed, you can contribute up to £3,600 annually, which includes £2,880 from you and £720 in tax relief.
Dr Nakisa continued: “Also, educate yourself and understand investment returns. Historically, stocks offer the highest returns, followed by bonds and cash. However, stocks are more volatile, so assess your risk tolerance to find a balance that suits your situation.
“For those in their 40s with a small pension, it’s crucial to start contributing more aggressively. Above all, though, keep it simple. A handful of funds is enough for almost everyone and makes management much easier without sacrificing the ability for strong returns.”
David Nicklin, SSAS consultant at Retirement Capital, warned savers against treating their pension like “a gym membership”. He said: “Most people treat pensions like a gym membership. They set it up with good intentions, ignore it for years and hope for miracles.
“If you are in your 40s with a small pot, you have time to build something real. If you are in your late 50s and only just starting out, it is not game over, but it is not amateur hour either. You need a plan, not just a polite chat with your provider.
“The real question is not whether you have enough. It is whether you are using what you already have to its full potential. Pensions are not just about saving; they are about strategy. With tax and inheritance changes on the way, those who are prepared will have the upper hand. A well-structured pension gives you room to manoeuvre. The time to act is now.”
On how to retire “comfortably”, Gosia Dawson, director at Glade Financial, said: “Pension planning is crucial, but often overlooked. Whether you’re in your 40s with a small pot or in your 50s and just starting, it’s never too late to take control. Begin by understanding what you have, where it is, and how it’s performing.
“In your 40s, maximise contributions and harness compound growth. In your 50s, review your retirement goals, check your State Pension forecast and consider using carry-forward allowances for tax relief.”
She added: “Always review your investment choices, check fees, update beneficiary nominations, and take advantage of employer contributions. A little action today can make a big difference to your financial future tomorrow.”
