When to start saving for a pension
Increasing life expectancy means that we are living and working for longer. We will need support when we stop working, and the state pension is unlikely to provide enough income for most of us. So we need to save some money for our old age, most likely in a pension, but when is the right time to start saving?
The basic rule is that the earlier you start saving the better as the effects of compound growth on your savings mean that money will grow in value if it is saved for longer. It is possible to save for retirement from birth with a Junior SIPP but saving for retirement this early on is not always practical and you should remember that the money will be tied up until your child is at least 57 and this may increase again by the time they come to retire.
But don’t worry, it’s never too late to start the savings habit and with generous tax reliefs for pension savings it makes sense to start saving as soon as you can.
Typically employers will offer a pension scheme that matches your contributions up to a certain limit and it’s usually worth joining this, as otherwise you are effectively turning down extra pay. Employers can also contribute to an AJ Bell Youinvest SIPP. Find out more about employer contributions.
ISAs can also play a part in your saving strategy and can be used alongside a pension to save for retirement. A Lifetime ISA is aimed at younger investors who are looking to save for retirement at 60 or for a first home, whilst a Stocks and shares ISA can be opened by anyone over the age of 18.
How much money should I save into a pension?
This all depends on what you can afford, what your target is at retirement and what time period you have to save over. The earlier you start the less you will have to save as investment returns will make your pot grow.
To find out more about how to build up a personal pension read our saving for retirement pages.