I started my pension at 48 years old and have over £580,000 - this is how I did it

A few months ago I joined PensionBee’s Pension Confident Podcast to talk about starting a pension in your 50s. I thought it might help to share more of my story, and how I built a pension of over £580,000 later in life.

I wasn't always financially savvy. In my 20s I spoke to a financial adviser who recommended I start a pension. I remember him showing me a graph explaining how the earlier you start investing, the less you may need to contribute over time.

To my regret, I didn't take his advice.

At the time I was earning little, and had lots of outgoings. I also wanted to save for a deposit to buy my own property, so any spare money went towards that.

In my 30s I worked for various advertising agencies that all offered workplace pension schemes. They'd match my contributions - where employers pay more into your pension if you agree to increase your contributions too. Sadly, I also failed to take this up, until a few months before I quit to become self-employed.

By my late 40s, I had around £1,000 in a pension. I remember seeing an estimate that it’d give me about £15 a year in retirement income. That wouldn't buy a prosecco lifestyle, let alone a champagne one!

But when I was 48, the business I'd started at 40 was finally making a decent profit. My accountant explained that pension contributions from my limited company could help reduce its Corporation Tax bill.

This time, I was wise enough to take the advice. I started a new pension and paid into it from my business. At the time, the standard annual allowance was £40,000 - this is the gross amount that can be saved into a pension each year, without incurring tax. 

Depending on your circumstances, you could also carry forward any unused annual allowance from the previous three tax years.

Over the past six years I've made significant contributions to my pension, to make the most of the available tax benefits. The standard annual allowance increased to £60,000 a year in April 2023 which meant I could add even more without incurring tax charges. I also hired an Independent Financial Adviser (IFA) to help me review my pension and investments.

Today my pension is worth over £580,000. More than £110,000 of this is investment growth, and I estimate my company has saved over £90,000 in Corporation Tax. Starting to pay into my pension six years ago has made a huge difference to my finances.

I know I'm rather an extreme case study. I've been fortunate to be able to pay so much money from my business into my pension each year. But I've also worked extremely hard. I worked seven days a week for years before my business turned a profit, and I've been frugal with my spending.

Today I'm passionate about helping other people plan for their retirement too, especially women. 

Research shows that nearly seven million people aged over 50 in the UK have no private pension savings, and it's estimated that 4.4 million of these are women. Women are also less likely to invest than men - we're thought to have just £450 billion invested, compared to £1.01 trillion for men.

As a result, women aren't just likely to have a smaller (if any) private pension than men. Their overall investments may be much lower too.

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How to build a pension pot later in life

I came to financial education later in life, but even so, you can see how much I've been able to turn things around. You may not have £60,000 a year to invest in a pension. But there may still be a lot you can do to prepare for the future.

Here are some of the things I've learnt, as someone who found themselves under-pensioned over the age of 45.

Save something every month

If you can, start saving something every month into your pension, even if it's a modest amount. Regular sums have the potential to benefit from compound growth over time, and can be working away for you while you get on with life.

One thing that helped me was looking carefully at my spending. Tracking what you spend may help you spot things you're happy to cut down on or cut out.

For example, if you put £30 a month into your pension for 20 years and investments grew by an average of 5% a year, it could be worth around £10,000*. This is only an illustration and actual investment returns will vary. 

You can use PensionBee’s Pension Calculator to see your own projection based on how much you can afford to contribute and what your desired retirement age is. 

*This is only an illustration and actual investment returns will vary. Figures assume starting with no pension savings and contributing £30 per month for 20 years, inflation of 2.5% and an annual management fee of 0.7%.

Make the most of the tax benefits

One thing I wish I'd understood earlier is that pensions come with valuable tax benefits.

Most UK taxpayers benefit from tax relief which is essentially free money from the government. Usually, basic rate taxpayers get a 25% tax top up from HMRC on eligible personal contributions, so if you pay in £100, £25 is added, bringing the total to £125.

And if, like me, you run a limited company, your company may be able to make employer pension contributions. The tax treatment is different from personal contributions, so it's worth checking the rules, or getting professional advice if you're unsure.

If you’re employed, you’ll likely be paying into a workplace pension. Under Auto-Enrolment rules, eligible employees must pay 5% of their relevant earnings into their workplace pension. Your employer has to pay a minimum of 3% - but they could be willing to pay more. Ask your workplace about employer matched contributions. 

Keep in mind that employer contributions aren't eligible for tax relief. Tax relief is only applied to personal and third party contributions (from anyone but your employer) up to 100% of your earnings, capped at £60,000 per year (2026/27).

Tax relief and potential investment growth over time can make a huge difference to your overall savings. For example, if you put £250 a month into your pension for 20 years, and investments grew by an average of 5% a year, it could grow to around £85,000*. 

*This is only an illustration and actual investment returns will vary. Figures assume starting with no pension savings and contributing £250 per month for 20 years, inflation of 2.5% and an annual management fee of 0.7%.

Don't be afraid of market volatility

One thing that can put people off investing is market volatility. But markets will always rise and fall, and pensions are usually invested with the long term in mind.

When markets fall, your regular contributions may buy more units of an investment for the same amount of money. While there's no guarantee that markets will recover within a particular period, historically markets have grown over time.

For me, the important thing has been learning not to focus too much on short-term movements. I'm investing for my retirement, so I try to keep that longer-term goal in mind.

Don't compare your pension

Finally, I don't recommend comparing your finances to others. It doesn't matter if someone else has more in their pension than you. It may only dishearten you, if you feel you can never catch up.

The only retirement numbers that matter are your own. If you budget, you can get a better idea of how much you may need to live on, and what you might want in retirement, both the basics and the luxuries you value.

And the good news is that, whatever your numbers are, like me you may still have the chance to make a difference to your retirement, by starting to build your pension now.

Learn more about starting a pension from 50 in Episode 50 of The Pension Confident Podcast. Watch the full episode on YouTube or read the transcript.

Hannah Martin is the Founder of Rich Retiree, an online resource aimed at helping women over the age of 45 prepare for a more rewarding retirement.

Risk warning 

As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. Tax rules can change and benefits depend on individual circumstances. This information shouldn't be regarded as financial advice.

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Image: Charlotte Rebecca Photography