Time to start thinking about a pension?

If you are in your teens or twenties (or maybe even older), chances are the last thing on your mind is saving for a comfortable old age. But will putting off saving for a pension cost you a small fortune in the long run?

It’s easy to understand why many people, especially younger workers are turned off by pensions: they seem complicated; they tie up money you might need now just to pay the spiralling cost of living; pension schemes nowadays tend to be less generous and less secure than they used to be; and besides, retirement is decades away. Why stress?

Well, maybe because money experts say most people working today have no idea how poor they could be in retirement and are in for a big shock unless they get to grips with their finances – and quick.  The sooner you understand your own situation, the sooner you can make an informed decision about how you’re going to manage in old age. Not all pensions are the same, and not all long-term savings options for workers are pensions, but millions of us end up staking our financial future on them.

If you are thinking about joining a pension scheme, here are four good reasons to get a wiggle on:

  1. Can you really afford not to? Could you survive on today’s basic state pension of £140 a week? That’s the maximum, by the way, assuming you’ve built up 35 ‘qualifying years’ of National Insurance contributions. Whether it will be comparatively more or less when you retire depends on how generous the government of the day is feeling.
  2. The sooner you start, the more you’ll have. Pensions are invested and normally grow a bit each year.  And in subsequent years not only do your contributions grow, but the previous growth grows too.  Putting aside a little bit regularly now is therefore better (more efficient) than making much bigger contributions later on. Ensuring a decent pension is never going to be cheap, but the longer you leave it the more expensive it will become, or the longer you may have to work before you can afford to retire.
  3. It’s tax-free. If you pay standard rate income tax you’ll get 20% tax relief on the contributions you make. For example, £40 a month becomes £50 in your pension pot!
  4. Take full advantage of employer contributions. Many employers already have some form of workplace pension provision in place, where they match or contribute a percentage of the amount that each member of staff puts in. That’s free money, every month, starting now! By 2018 it will be law for all employers to auto-enrol their staff in an employer pension scheme. Find out from your employer if they offer a workplace pension scheme and use this pension contribution calculator to see how much you could put away each month.

It is easy to get confused by pensions. But the great thing about auto-enrolment pensions is that they are designed to work  without savers having to make complicated choices about where to invest their savings if they don’t want to.  But there is still one choice that everyone should think about, and that is about whether they can afford to save more than the minimum as that’s the way to turn a barely adequate pension into a better one.

Of course, as you approach retirement you will need to think about how you turn your savings into a pension. This is when you will need guidance or advice and have to make what may be tricky decisions. But if you are many years from retirement and starting to save, then the simple advice is let yourself be auto-enrolled into your employer’s scheme, and if you can afford it find out how you can put more in and whether that in turn will trigger a higher contribution from your employer.

Here at workSMART, we’re not authorised to provide financial advice, but you may find our information on pensions useful to work out the questions you need to ask a professional adviser, and to give you the confidence to ask for more detail.

What is WorkSmart?

A career coach that works for everyone.


Enjoy bite-sized activities delivered to you every week.

Lightbulb brain

Equip yourself with essential skills to be the best you yet.


Get the guidance you need to stay focused and reach your goals.

Worksmart circle