There are many reasons why people take time off work after having children, however, stopping pension contributions whilst doing so can make a big dent in your overall retirement savings.
It is possible to pull your pension back on track and to recover the the shortfall, by forward planning, extra topping up of your pension, and ensuring you are receiving tax credits and breaks wherever you can.
Is my pension on track?
First things first, check if your pension is on course for your retirement.
If it is your State Pension, you are able to check via the government website. It should tell you how much you are expected to get, what age you’ll receive it, and how you can increase it.
For private pension savings, like one through a work scheme, you can check this by contacting your pension provider directly. You can usually do this through an online portal, if you have one, by looking through your last pension statement or if you have a financial adviser or pension adviser, speak to them.
Should I top up my pension?
If you are worried and have concerns over the amount of money you’ll get in your retirement and you want to increase it, you are able to top up your pension contributions.
However, before you start saving more money, it is worth looking at exactly how much you are aiming to have for your retirement.
Couples will need around £26,000 or £13,000 each to cover their household essentials, plus a few extras such as holidays. Depending on when you decide you are going to retire, this could be quite a big sum.
What to consider with regards to pension contributions
Your pension contributions could have changed whilst you took time off work.
For people with workplace pension schemes, employers have to continue making payments whilst employees are in receipt of maternity or paternity pay for up to 39 weeks, at the same value it was paying in before you went on leave.
However, your salary may well have fallen during this time and you will only need to pay a portion of the lower rate. If you stopped paying in contributions altogether, this will affect both your entitlement to the state pension and the size of your pension pot.
Therefore it is crucial to start saving money again as soon as you can. Even if your salary has dropped or you are not working, it is still very possible to benefit from government tax breaks.
If you earn less than £3,600 or not earning at all, you are allowed to save a total of £3,600 each year. The government then tops up these contributions, so the maximum you can put away is £2,880 and it will add the rest up to the limit.
Therefore, if you have got any cash to spare, either through savings or perhaps another source, by paying it to your pension you are getting a little extra bonus from the government and further boosting your retirement income.
