How to plug a pension shortfall in 5 steps

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FIRST, make sure you have a good picture of all the policies and plans with which you intend to fund your retirement, using up-to-date valuations and statements.

Request a state pension forecast, too. Armed with all of this information you should be able to calculate the level of income you stand to receive in retirement. Is it enough to fund your desired lifestyle?


Time permitting, you might want to increase your pension contributions within allowed limits. You will receive tax relief on these at your highest marginal rate.

You could potentially sacrifice some of your salary too, whereby you agree to a lower salary in exchange for pension contributions from your employer. In some cases, your employer will agree to pay some or all of the income tax and National Insurance it saves into your pension – further boosting the effectiveness of the sacrifice.


Investment returns have been falling over the past 30 years and, as such, active fund managers are under growing pressure to justify their high fees. Switching to passive funds (such as trackers) could boost your returns as less is eaten up by fund management costs.

Depending on your investment strategy, you might also want to switch to funds with a higher expected rate of return. This is likely to increase the volatility of your portfolio, so make sure you have sufficient years until retirement to recoup any losses.


Think about the level of regular income you will need to live the lifestyle you desire. Consider other lump sum expenditure events too, such as holidays and new cars. If this still leaves you with a shortfall you could reduce your income requirements, decide to work longer, downsize your home or start a retirement business. You could also speak to your employer about phased retirement rather than stopping abruptly.


Firstly, consult your family to discuss your retirement plans. Then seek the help of a highly-qualified financial adviser who can use cashflow modelling to ascertain how much you are likely to need in savings for retirement and outline the options for plugging any gap.

• David Gow is a chartered and certified financial planner at Acumen Financial Planning