Jasmine Birtles
Your money-making expert. Financial journalist, TV and radio personality.
Easy ways to supplement your pension
Reading Time: 6 minutesDo you need to supplement your pension? A recent survey by Which? revealed the average retired household spends £27,000 a year – up to £42,000 for a comfortable retirement.
If you’re worried that you don’t have enough in your pension pot for this kind of annual income, don’t panic! There are still plenty of things you can do to maximise your retirement income.
- Consider deferring your State Pension for extra money
- Make sure you get the best annuity rate
- Earn an extra £350 per year whilst you shop
- Make cash with surveys
- Slash your day-to-day costs
- Get help with winter energy bills
- More money-making tips
Put off claiming your State Pension
Most jobs no longer have a compulsory retirement age. You can keep working for as long as you like! Even if you’re in a job with a compulsory age, such as firefighters or airline pilots, you can use your knowledge to take other jobs such as consulting or teaching positions.
You can take your State Pension when you’re aged 66 – but you don’t have to. If you keep working, taking your State Pension at the same time could mean you pay more in tax.
Instead, consider deferring your claim to the State Pension for a few years while you continue to work. Not only does this mean you’ll continue to have a working income to save for your retirement, but your State Pension payments will increase, too.
How much State Pension will you get?
Check your State Pension forecast here. You could also be eligible for Pension Credit, boosting your income to £167.25 if you’re single or £255.25 for couples.
How does deferring increase State Pension payments?
Your State Pension payment increases by 1% for every nine weeks you defer. Assuming you’re eligible for the maximum payment of £168.60 per week once you turn 66, if you defer by two years your payments would be an extra £19.22 a week. One year (52 weeks) adds just under 5.8% to your weekly payments – with two years raising that to just over 11%.
So, instead of getting £168.60 a week, you’d get £187.82 a week – or just shy of an extra £1,000 a year. You have to take these payments weekly though – it used to be that you could take the extra as a lump sum. Still, this is a good way to boost your State Pension income when you’ve retired to make sure you have enough to live comfortably.
The Pensions Advisory Service has lots of useful advice about deferring State Pensions, too.
Get the best annuity rate
In April 2015 the rules for pensions changed to give you more freedom of choice about what you do with your pension when it’s time to take it.
You can take up to 25% tax-free as a lump sum, draw an income from it, or combine these options with 25% of regular income paid tax-free.
What is an annuity?
The annuity is the agreement you take to withdraw your pension. A fixed-term annuity lasts for an agreed amount of time: you’ll get a guaranteed income for the agreed number of years. On maturity, you can choose to buy a different type of annuity or another fixed-term one.
You need to buy an annuity before you can take an income from your pension.
You can shop around for the best annuity rate now: you don’t have to take the one offered by your current pension provider. The Open Market Option is your legal right to buy an annuity from ANY provider on the market – so make sure you look around before finding the right annuity for you.
Finding the best annuity rate maximises the income you’ll receive from your pension pot. If you’re unsure what the best option is for you, speak to an independent financial adviser: they’re legally obligated to provide impartial advice in your best interests. Unlike an adviser limited to specific providers, an independent adviser will have access to all the deals available across the whole pensions market.
Make money shopping
Did you know you can get money back for shopping in the places you always buy from anyway?
Internet cashback sites offer an easy way to earn a percentage of each purchase back. These sites are paid by retailers to drive traffic to their online shops – and the cashback sites share some of this money with you.
Every time you buy through a cashback site, you can earn anything from 1-10% or more on your purchase. It’s not just goods either: when it’s time to change energy supplier, broadband, or renew your car insurance, you can earn tens (and sometimes hundreds) of pounds just by going via a cashback site.
How to use cashback sites
To earn cashback, create a user login on the cashback site. Then, whenever you need to buy something, check first on the cashback site to find the retailer. If it’s listed, click through via the site and your click – and purchase – is automatically tracked. A great way to remember to shop via the cashback site is to set it as your homepage – whenever your internet browser opens, the cashback site will load to remind you to use it!
You can also set up an account with different cashback sites. Some offer exclusive cashback for certain retailers, or better bonuses than other cashback sites. Having an account with two or three cashback sites means you can find the best deal to maximise your cashback.
Make sure you stick with reputable sites like Topcashback and Quidco. Always read the terms and conditions, too, so that you know how and when you get paid. Some offer free and paid account options: regular users often benefit from paying for the enhanced account option, as the bonuses are often bigger.
You can often earn an extra bonus on your payment if you choose to be paid in a gift card instead of directly to your bank account. These gift cards include prepaid Mastercards, which act like any other debit card, so you’re not limited to one retailer to spend your cashback.
Remember to sign up to Money Magpie Rewards to earn money, too!
Double your cashback opportunities
Shopping online is safer with a credit card. You have greater consumer protections if you need a refund or if a retailer doesn’t deliver as promised.
It also offers you greater warranty protections, such as on appliances that require replacement within the first 12 months due to faults.
As long as you pay a credit card off in full every month, you won’t pay interest on your purchases, either.
Some credit cards offer cashback on your purchases. So, if you go via a cashback site AND pay using a cashback credit card, you could increase the amount of cash you earn back on your purchases!
Remember: only use cashback sites for purchases you were going to make anyway. A cashback bonus isn’t a bonus if you’ve spent the money needlessly!
Take online surveys to make extra cash
Another way to take advantage of the digital age to supplement your pension is with survey sites.
For a few minutes of your time each day, you’ll earn rewards to turn into gift cards or cash. All it takes is answering a few questions on surveys. That’s it! The money quickly adds up and it’s easy to complete a survey when you have a few spare minutes each day.
Swagbucks are a reliable resource for earning cash through taking surveys.
Cut the cost of everyday living
Supplementing your pension is one way to ensure your retirement is comfortable. Of course, if you create thrifty habits before you retire, you’ll save more for your retirement AND be able to live off less when you stop working.
Simple steps, such as finding ways to reduce your energy bills, all add up to extra savings and less money spent in retirement.
Other ways to save on everyday spending include:
- Using comparison websites when renewing insurance policies
- Finding discount vouchers for meals out, shopping, or experiences
- Accessing senior discounts like the Over 60s Railcard
- Changing supermarkets to a less expensive retailer
- Switching to own-brand products instead of brand names
- Reduce (or quit) your alcohol and meat consumption
- Try charity shops for furniture, clothes, and other items
- Switch energy suppliers to save on electricity and gas bills
- Request a water meter if you live alone or as a couple
Sign up to the free Money Magpie weekly newsletter to make sure you’re getting the latest in everyday savings and discount offers, too!
Apply for a warm home discount to reduce winter energy bills
You may be eligible for the Warm Home Discount, an annual payment credited to your energy bill in winter. In 2019/2020, the winter Warm Home Discount is £140.
If you receive the Guaranteed Credit element of Pension Credit, you’ll automatically qualify for the payment. Other people may qualify, such as those on a low income or with severe disabilities. You can apply to the scheme via your energy provider if you think you may be eligible. The number of grants is limited so make sure you register for notifications to apply as early as possible each year.
You could also benefit from the Winter Fuel Payment if you were born before 6th April 1954 – which is up to £300 towards your energy bills. Those on Pension Credit or other benefits may also get Cold Weather Payments, which amount to £25 paid automatically to you for every 7-day period the temperature stays below 0̊ Celsius.
More money-saving tips to supplement your pension
Make sure you’re doing all you can to make a little extra money while you’re saving for retirement – these articles have lots of handy tips!
- Perks for the over-60s
- Get money for free (yes, really!)
- Save money shopping
- Slash your pet costs
- 10 easy ways to make quick cash
- 20 strange ways to make money
- How to save if you’re broke
- How to be 30% richer in retirement without saving more
Great and informative magpie, contains a lot of useful stuff:) This is not my strength at all, I need all help I can get and this could really help me. Voted up and useful.
If you have saved a little and paid your way thro’ life then you will be rewarded by paying tax and if you are unfortunate to be placed in a residential home you will lose the lot. As for benefits such as pension credit, carers allowance, dla etc., they are all subject to strict and complicated form filling , and in the case of dla, a medical.
On the other hand, pass your life dodging work and creating off-spring,
claim everything under the sun and brother you will be rewarded and looked after for ever more!
Hi, Senior citizens should also be made aware of the existence of Attendance Allowance -AA- (above Pension Age) and Disability Living Allowance-DLA- (below Pension Age). These are benefits payable to anyone experiencing any long-term health problems. AA is currently payable at £71.40 per week higher rate and £47.80 per week lower rate. DLA is currently payable at a maximum of £121.25 per week for high mobility and higher rate care component. The various rates are as follows: Care component Weekly rate Highest rate £71.40 Middle rate £47.80 Lowest rate £18.95 Mobility component Weekly rate Higher rate £49.85 Lower rate £18.95… Read more »
Wow, thanks for all that information Phil!
You are very welcome Jasmine.