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Please note that tax, investment, pension and ISA rules can change and the information and any views contained in this article may now be inaccurate.

Our pensions expert explains why there are benefits to building a retirement pot even if you’re older
Thursday 17 Jun 2021 Author: Tom Selby

I’m 55 and, for various reasons, have only just started saving for retirement. Have I left it too late?


Tom Selby, AJ Bell Senior Analyst says:

Although automatic enrolment will provide a solid retirement saving foundation for millions of younger people, for those later in their careers there might be a feeling the reforms are too little, too late.

In particular, there will be plenty of people in a similar position to you who have missed out on generous defined benefit pensions in the private sector and for whom auto-enrolment at the minimum will fall well short of their expectations.

In this situation it might be tempting to question whether there is any point in building a retirement pot.

However, provided you are under age 75 then money saved in a pension should be a good investment as it benefits from tax relief as well as a matched contribution in your workplace scheme.

Furthermore, with a bit of careful planning and diligent saving you can still make up for lost time.


Take someone aged 55 who hasn’t saved anything for retirement. While they may feel time is working against them, provided they are in good health they could easily live for 40 years or longer.

They could also keep saving onto a pension and benefitting from tax relief for the next 20 years.

If they made a personal contribution of £3,000 a year into a pension – around 10% of the average UK salary – this would automatically be boosted to £3,750 via basic-rate tax relief. Higher and additional-rate taxpayer could also claim extra tax relief from HMRC.

If they kept saving this until age 67 – the projected state pension age for a 55-year-old today – and enjoyed 4% inflation-adjusted investment growth after charges, they could have a fund worth £65,000. If they continued contributing until age 75, the fund could have grown to £125,000.

Someone who is able to save £10,000 in a pension from age 55, meanwhile, could build a fund worth £216,000 by age 67 and £416,000 by age 75 if they enjoyed similar levels of investment growth.


It’s worth remembering as you build your retirement pot that pensions are no longer just a vehicle to provide an income in later life – although of course this is still important for lots of people.

Pensions can be passed on tax-free if you die before age 75, while if you die after age 75 they will be taxed in the same way as income when your beneficiary or beneficiaries come to access it.

So saving in a pension, whenever you decide to do it, is an investment not just in your own future, but potentially in the futures of your loved ones as well.

Please note, we only provide information and we do not provide financial advice. If you’re unsure please consult a suitably qualified financial adviser. We cannot comment on individual investment portfolios.

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