The handy National Insurance trick that can help you retire THREE YEARS early

A unique opportunity has arisen to boost your wealth after retirement. If you act now, you can boost your retirement savings by a life-changing sum – almost £200,000 at best – and it’ll be painless.

With such a boost, you could enjoy a richer older age or choose to finish work several years earlier than if you didn’t take advantage of it.

What brought about this opportunity? Last Saturday’s premium discount.

The government has reduced the main rate of national insurance contributions paid by employees from 12 to 10 percent.

That means up to 27 million people could see their net salary increase in their next pay packet. Anyone aged 16 to state pension age who earns more than £242 a week from one job should benefit.

The tax cut is worth around £450 a year for a worker with an average salary of £35,400, according to the Treasury. But the amount you save depends on how much you earn. If you earn more, this could go up to €754.

Of course, an increase in take-home pay is always welcome and for many people it will be essential to keep up with rising bills.

But for those who can afford it, it’s a perfect time to put extra money into your retirement before you get used to it.

That means you avoid the pain you normally experience in improving your later life finances by cutting back on your spending today.

You can enjoy the exact same lifestyle you’ve had until now, while seamlessly improving your financial future.

Bertrand Pole, technical pensions specialist at asset manager Evelyn Partners, said: ‘I told all my friends to do this.

Some people will need the extra money for essentials, but for many it will only be spent on small things: an occasional drink in the pub and then that’s it. But put it in your pension, and you will notice a real difference later.’

Money Mail asked Evelyn Partners to calculate how valuable this trick could be.

Basic rate taxpayers are expected to see their income increase by up to £62.83 per month thanks to the tax cut.

However, if you were to take this straight into your pension it would immediately be worth £78.53 per month as pension savings benefits from a 20 per cent government tax credit.

How much this monthly increase could grow in retirement depends on how long you have before you stop working; the younger you are, the more you benefit from this.

A 25-year-old could throw away a whopping €134,389 extra thanks to the savings trick, but even a 65-year-old with just two years left until retirement could get a €2,064 boost.

Evelyn’s figures assume that your savings grow by 5 percent per year, after fees, thanks to investment growth.

A 25-year-old taxpayer on a higher rate would be up to £179,687 better off in retirement as their monthly savings of £62.83 would be topped up to £105 thanks to a 40 per cent tax reduction.

A 45-year-old could increase his pension by more than £50,000 and a 35-year-old by almost £100,000, assuming he keeps it invested until he is 67.

The calculations are on the conservative side because they do not take wage growth into account. If you move up a tax bracket during your working life, the benefits can be even greater.

Taxpayers with an additional rate will receive a 45 percent tax reduction, resulting in even greater savings. If your employer matches your additional contributions, your pension increase could be worth twice as much, at no extra cost to you.

Employees who build up a pension through a salary sacrifice scheme could see even bigger benefits if they put this money into their pension, says Becky O’Connor of pension company PensionBee.

Salary Sacrifice involves an employee agreeing to give up part of their salary to apply directly to their pension.

Most employers who offer this scheme will match the higher premiums you pay and you will receive tax relief on the money you pay. This means that both employer and employee save tax, as National Insurance is not paid by either party on pension contributions.

Ms O’Connor says: ‘If you have a salary sacrificial pension at work, there is another tax benefit to putting more into your pension – you can reduce your income tax and National Insurance bills.

‘This is particularly useful if you are just above the threshold for paying a higher tax rate, as paying more in pension may take you back to the basic rate.’

Alice Guy of investment platform Interactive Investor estimates that a salary sacrifice could save an earner with £30,000, £150 a year and someone with £50,000, £250 a year, all of which would boost retirement savings even further if converted into a pension . .

Dean Butler of pensions company Standard Life adds that millions of workers are currently not saving enough to meet their expected retirement income.

‘If you find yourself with extra money every month, whether that’s from a pay rise or a tax cut like this month’s National Insurance cut, it might be a good idea to put it into your pension before you get used to it ‘, he says. .

‘Even a relatively small increase can now make a real difference in the retirement age.’

If you want to increase your pension contributions, contact your workplace pension provider and let them know how much you want to increase them.

While cuts to national insurance provide the perfect opportunity for millions of workers to boost their pensions at the same time, individuals can also spy on their own chances at certain points in their working lives.

For example, a pay increase can be a good time to give your pension a boost before you get used to the extra income.

The month in which you pay off your student loan and the payments stop can also be a great opportunity.

Steven Cameron of pension company Aegon points out that there may be more opportunities later this year in the form of further tax cuts.

“There are high hopes that the March budget will include an income tax cut,” he says.

‘This could increase the net salary even further. As with the National Insurance reduction, getting into the habit of saving this before you get used to the extra income can really benefit your future standard of living in retirement.”

Mr Cameron adds that the cut in National Insurance may make it even more important to increase your own pension contributions. This is because national insurance contributions are used to pay for the state pension.

He says: ‘Current employees’ national insurance contributions pay for current state pensions. Now that less will be collected from National Insurance after the reduction, the future financing of the state pension with the current triple lock will become a greater challenge.

‘So it makes doubly sense to use your National Insurance savings to increase private pensions, rather than relying too much on the state pension.’

Rachel.rickard@dailymail.co.uk