How to boost your pension pot in 2026
The New Year is fast approaching, and with it, resolutions to improve financial situations and retirement outlooks.
This can be done through changing cash ISA accounts for one with a more favourable interest rate, investing in the stock market or paying off debts.
But for many people, in particular those approaching retirement, reviewing and updating pensions can be one of the most beneficial ways to boost their finances.
Craig Rickman, personal finance expert at Interactive Investor, said: “Making some time to review your pension and get your retirement savings on track could be the best thing you do for your finances in 2026.
“Make a start by digging out your paperwork and checking how much you have saved.”
For those in the private sector, a workplace pension will most likely take priority, however it is also worth getting a state pension forecast to see when it will be received and if there are any gaps in your national insurance record.
Brits need 35 years’ qualifying national insurance contribution (NIC) or credits to receive the full state pension, but any gaps can be plugged by paying voluntary NICs, for the past six tax years.
Utilise salary sacrifice
Salary sacrifice on pension contributions allows employees to effectively take a pay cut in exchange for higher pension contributions, granting some the chance to come back under the £100,000 threshold.
But, in last month’s Budget, the Chancellor introduced a £2,000 cap on salary sacrifice schemes per employee per year.
This means any further pension contributions over this amount will be subject to standard national insurance tax rates of eight per cent on salaries under £50,270 and two per cent on any income above that.
However, the changes to the system are not set to take effect until April 2029, giving Brits four tax years to “make the most of the current rules” and make pension saving more affordable through avoiding national insurance.
Reduce fiscal drag
The Chancellor also opted to freeze income tax thresholds until 2031 in the Budget, a move which is expected to drag more people into paying higher rates.
The decision will push 780,000 more people into the basic rate, 920,000 more into the higher rate, and 4,000 into the additional rate by the end of this parliament, but upping pension contributions can soften the blow of the so-called ‘stealth tax’.
Rickman said: “Pension contributions, within certain annual limits, are exempt from income tax, so you can effectively claw back tax on contributions.
“It’s well worth sitting down to work out if you can afford to boost your pension contributions, as even small increases can have an outsized impact on your retirement wealth due to investment compounding, which can help your wealth to snowball over time.”
This is particularly beneficial for both higher and additional rate taxpayers, who can save 40 per cent and 45 per cent tax respectively.
Meanwhile Brits earning between £100,000 and £125,000 can save as much as 60 per cent income tax, as pension contributions help them keep more of the £12,570 tax-free allowance.
Looking for lost pensions and consolidation
According to Interactive Investor, over three million pension pots are waiting to be claimed, with an estimated £31bn locked away, due to many employees forgetting to collect their pensions upon moving jobs.
Tracking lost pensions can help accumulate wealth, with employees needing either the name of the scheme or their old employer to find it through the government service.
Upon locating lost pensions, it is also worth looking to consolidate your overall pot.
Rickman said: “When we move jobs during our career, we often collect small pension pots and end up with a mountain of pension paperwork.
“Although combining those pots won’t be right for everyone, it’s worth considering, especially as you approach retirement and need to start making decisions about managing your pension.”
Combining pots can make it easier to keep track of investment performances and fees, but in some cases moving transferring pots can cause the loss of hidden benefits such as guaranteed annuity rates, so it is worth checking pension fund rules before making any decisions.