My 3 tips to double your State Pension and avoid pension poverty

Rupert Hargreaves highlights three simple ways you make sure you’re heading for a comfortable retirement.

Rupert Hargreaves

Rupert is a committed value investor and regularly writes and invests following the principles set out by Benjamin Graham. As well as writing for the Motley Fool, he is the editor of Hidden Value Stocks, covers value investing for Gurufocus and hedge funds for ValueWalk.com. Rupert began his career as a proprietary currency trader and still trades on a daily basis. Rupert holds professional level qualifications from the Chartered Institute For Securities & Investment and the CFA Society of the UK. He can be found on Twitter @ruperthargreav1

Published 13 October, 2019 10:12 am BST

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

According to my calculations, to double your State Pension in retirement you will need to have £225,000 saved by the time you decide to quit the rat race.

At first glance, this might seem like a lot of money, but it’s very accomplishable if you’re earning an average wage.

Today I’m going to explain my three tips to help you build your retirement savings pot and hopefully achieve a comfortable retirement.

Get saving early

My first tip is to start saving into your pension as soon as possible. Even if you can only afford a few pounds a week, it is better than nothing and will make a significant impact over the long term.

Indeed, according to my calculations, just £2 a day could be enough to double your State Pension in retirement if you keep this savings habit up for four decades.

Tax benefits

My next tip is to take advantage of all the tax benefits available for retirement savers.

There are two main products on the market at the moment that can turbocharge your savings growth – SIPPs and LISAs. Both of these products are designed to help people save for the future, and any money deposited is entitled to a government bonus.

LISA contributions receive a government top-up of 25%, up to a maximum of £1,000 a year, while any money saved in a SIPP attracts tax relief at the taxpayer’s marginal rate. For most savers, this will be 20%, but the rate does vary and there are limits on contributions. So, it is sensible to check how much you are entitled to first.

Any income or capital gains earned on money invested in either of these wrappers is tax-free.

Invest for the future

The most important thing you can do if you want to double your State Pension without having to make sizeable contributions is to invest your money.

There are many ways of doing this, and depending on where you are on your savings journey, some assets might be more suitable than others.

For those just starting out, a low-cost passive tracker fund that tracks a high-growth index such as the FTSE 250 or FTSE All-Share is the best bet, in my opinion. These indexes have produced returns in the region of 8% to 10% per year over the past couple of decades.

At 10%, your money would double in value every 7.2 years. The great thing about these funds is that there is no need to analyse every position owned by the tracker. All you need to do is sit back, relax, and watch your money grow.

Savers in the middle of their journey might want to take a bit less risk. Vanguard’s LifeStrategy Funds are perfect for this cohort. The LifeStrategy 80% Equity Fund has an 80% allocation toward global equities and 20% in bonds. Over the past five years, every £1,000 invested has grown by around 60%.

Other alternatives of this strategy are also available such as the LifeStrategy 60% Equity Fund, which has a 60/40 stock/bond allocation.

And finally, those nearing the end of their saving-for-retirement journey might want to consider a bond fund. These come with much less risk than equities but also produce a higher yield than you would get on most cash savings accounts at the moment.