Starting early gives your savings more time and opportunity to grow, but reviewing old pensions and topping up contributions can help at any age.
The benefits of saving early
The earlier you start saving for retirement, the greater the potential for growth. Investment growth can snowball over time thanks to compound interest. This is when you earn returns on your returns, creating a snowball effect over the years.
The age you start saving can make a big difference to your overall retirement pot. For example, if you start saving *£250 per month into a pension at age 25, you could have around £200,000 in your pot by age 66. Whereas if you start at 35, you’d need to contribute £350 per month.
*The figures have been calculated using PensionBee’s Pension Calculator, and are inclusive of tax relief and potential employer contributions. These calculations assume you start with no pension savings, investment growth of 5% a year, inflation at 2.5% and management fees of 0.70% a year.
By starting early, you could also benefit more from:
Employer contributions - if you have a workplace pension, your employer usually pays in too. The minimum contribution from your employer under Auto-Enrolment rules is 3% of your ‘qualifying’ earnings. This is your annual earnings between £6,240 and £50,270 (2025/26). More on this later.
Tax relief - most UK taxpayers get tax relief on their pension contributions, which means that the government effectively adds money to your pension pot. Usually basic rate taxpayers get a 25% tax top up but higher and additional rate taxpayers may be able to claim more via a Self-Assessment.
Knowing the lifestyle you want in retirement can help you decide how much to save. The Retirement Living Standards from Pensions UK are a useful benchmark. They can help you estimate the income needed from covering the basics to enjoying travel, hobbies and dining out. Even if you haven’t started saving for retirement yet, there’s still plenty you can do to catch up. The important thing is to start now.
What are the most effective ways to save for retirement?
There’s no single ‘best’ way to save for retirement. The right mix will depend on your age, goals and circumstances. Here are some options and practical retirement saving tips to help you choose what’s right for you.
Pensions
Pensions are a powerful tool for retirement saving because of their tax advantages and employer contributions.
Workplace pensions
If you’re employed, your workplace pension is likely the easiest way to save. Thanks to Auto-Enrolment, if you’re eligible, you’ll be automatically enrolled into the scheme without having to opt in yourself. This means:
you contribute a portion of your salary (a minimum of 5% of your ‘qualifying’ earnings);
your employer adds their share (a minimum of 3% of your ‘qualifying’ earnings); and
you get tax relief from the government.
Over time, those combined contributions, potential investment growth and compound interest can add up to a substantial retirement pot.
To be eligible for Auto-Enrolment, you must:
work in the UK;
be at least 22 years old, and haven’t yet reached State Pension age;
earn more than £10,000 a year; and
not already be a member of a suitable workplace pension scheme.
If you’re younger than 22 or earn between £6,240 and £10,000, you won’t be automatically enrolled. However, you can ask to join the scheme and your employer can’t refuse. Speak to your workplace to find out more.
Self-employed pensions
If you’re self-employed or want more control over your investments, there are other pension options. You might want to consider:
a Self-Invested Personal Pension (SIPP); or
These offer the same tax relief benefits, but you choose the provider and how your money is invested.
PensionBee offers a self-employed pension. The sign up is simple and you can make flexible contributions depending on your income.
State Pension
Alongside any personal or workplace pension, you may be entitled to the State Pension. The State Pension is a regular payment from the government that you might be able to claim once you turn 66 (rising to 67 from 2028). But you’ll need enough qualifying National Insurance (NI) contributions to receive the full amount. The full new State Pension is currently £11,793 and you’ll need 35 years of NI contributions to claim it.
While valuable, it may not be enough on its own to fund your ideal retirement lifestyle.
Lifetime ISAs
A Lifetime ISA (LISA) can be a great complement to a pension, especially for younger savers. You can open one if you’re aged 18-39 and save up to £4,000 each tax year until you turn 50 (2025/26). The government adds a 25% bonus which is up to £1,000 extra annually.
While LISAs can be used to buy your first home, they can also be used to save for retirement and can be accessed from age 60. Just remember that withdrawing earlier for non-eligible reasons will trigger a penalty.
Regular savings accounts and ISAs
Not all retirement savings need to be tied up until later life. For shorter-term goals or for those who prefer lower-risk options, Cash ISAs and fixed-rate savings accounts can play a role.
Cash ISAs let you save without paying tax on the interest you earn, and fixed-rate savings accounts can offer competitive interest rates if you lock in your money for a set term. While they won’t match the growth potential of investments, they can be a useful part of your savings plan.
How to save for retirement in your 40s
Your 40s can be a pivotal decade for retirement planning. You may be earning more than you did in your 20s and 30s with more capacity to save.
Even if you’re starting from scratch, you could still have 20-30 years to save and invest your money. Here are a few things to consider in your 40s.
Review old pensions - many people accumulate multiple pots from different jobs over their working life. Bringing them together can make them easier to manage and potentially reduce fees. Find out more about pension consolidation.
Top up contributions - even small percentage increases to your monthly contributions can have a big long-term impact.
Keep track of your progress - use PensionBee’s Pension Calculator to check if you’re on track for the lifestyle you want.
How to save for retirement in your 50s
If you’re planning to retire within the next decade, your 50s is a good time to maximise contributions and fine-tune your plans. If you’re a homeowner, your mortgage payments may have reduced leaving you with lower living costs. And if you’re a parent and your kids are older, you might have spare cash you can use to boost your savings. Here’s some things to think about.
Increasing contributions - if you’ve paid off your mortgage or your children have left home, redirecting those funds into your pension could give it a healthy lift.
Checking your investments - as you near retirement, you might want to gradually reduce risk to protect your pot from stock market swings.
Visualising your lifestyle - Pensions UK’s Retirement Living Standards can help you estimate how much you’ll need for the kind of retirement you’re aiming for.
Top tips to maximise retirement savings
Saving for retirement doesn’t have to be complicated or intimidating. And you don’t have to be wealthy to start. The most important step is to begin, even if it’s with a small amount.
Here are some reminders:
make the most of the tax relief that you’re eligible for;
track down old pension pots and consider combining them;
increase contributions as and when you can; and
use a Pension Calculator to keep your retirement goals in sight.
Retirement planning can also include protecting your income and lifestyle through life insurance or critical illness cover. If you’re a homeowner, you might also want to think about your options when it comes to using your property to help fund your retirement. For example, downsizing or equity release later in life. These steps can complement your pension and give extra financial peace of mind.
By making the most of pensions, exploring additional savings options and tailoring your approach to your life stage, you can work towards a happy 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. This information should not be regarded as financial advice.
08-10-2025
