Starting a pension in your twenties can save you hundreds in your thirties
A single person who wants to retire at 55 on a £13,000 annual income would need to save £496 a month from the age of 25, according to wealth manager Nutmeg.
However, if that same person waited to the age of 30 to start paying into their pension, they’d need to save £629 a month – that’s an extra £133 a month.
For a more comfortable retirement income of £19,000 a year, a 25-year-old would need to save £716 per month, rising to an eyewatering £1,200 if they delayed until 35.
Annabelle Williams, personal finance specialist at Nutmeg, said: “The later you start building up your pension, the harder it is to catch up later in life and the more you’ll have to be putting away when you’re older. This is because you will have missed out on all those years of hopefully good investment performance and the power of compound growth, which is when your investment performance comes on top of previous returns.”
Delaying retirement would take the pressure off contributions. A 25-year-old would need to save £784 a month to generate a £31,000 annual income, rising to £1,165 if they started at 35 and wanted to retire at 65, the current retirement age.
Williams added: “Even if it doesn’t feel like you’re putting much away initially, the sooner you start, the better.
“It’s also important to remember that contributing to your workplace pension means you’ll benefit from employer contributions – effectively meaning your company is covering some of that monthly contribution. And if you can put more away when you get a pay rise or make additional one-off payments, your future self will be very grateful.”
The Nutmeg analysis assumes an annual investment return of five per cent and does not include state pension contributions.