Is it ever too late to start a pension?

A pension can give you an income when you retire, but how much will depend on what you contribute during your working life. Here are your pension options, even if you have no pension at 50.

Pensions are long term investments. You may get back less than you originally paid in because your capital is not guaranteed and charges may apply.

When should you start a pension?

The earlier the better, but you can build a pension income even if you start later in life.

  • If you contribute from an early age, you have a longer period of time to build your pension fund, which could give you a better income when you retire.

  • If you begin to contribute later in life, you can still add the equivalent of your annual salary* into your pension fund each year tax free.

If you think you will not have enough income to live on when you retire, speak to an independent financial adviser to discuss your options.

* Or up to £3,600, whichever is higher.

Could you afford to retire?

You should think about the financial position you could be in when you retire:

  • What outgoings will you have? Will you still be paying for a mortgage or rent?

  • What lifestyle will you want? Will you explore the world or improve your home?

  • Will you want to help your children and grandchildren out financially?

It is important to try and clear your debts before you retire, otherwise you could see your retirement income stretched and you could default on your repayments.

How much do you need?

Think about how much money you will need to afford a comfortable lifestyle when you retire. You can do this by answering the following questions:

  • What income do you want when you retire? For example, £12,000 a year

  • How much can you afford to save each month? For example, £100 a month

You can use one of the following pension calculators online to predict how much income you will get from your pension based on how much you contribute:

Unfortunately, you may find the amount you can afford to save each month will not give you the retirement income you want.

It is never too late to start saving for your retirement, but the longer you leave it the more you will need to invest to build the income you want.

What pension could you get?

State Pension

The amount you get from your State Pension will depend on how much you have paid in National Insurance.

You can make a lump sum payment to make up any shortfall if you have missed any National Insurance payments in the past.

You get your State Pension as an income each month when you reach your State Pension age.

Here is more information on the State Pension

Workplace pension

If you work for an employer, they may have a workplace pension scheme that you could join.

Some employers also contribute to your workplace pension, so it is worth asking your manager or HR team for more information.

There is a chance you may have already been automatically enrolled onto your employer's pension. You can read out guide to find out if auto enrolment applies to you.

Here is more information on workplace pensions

Self Invested Personal Pension (SIPP)

You can open this type of pension without any help from an independent financial adviser, and is completely self managed.

You can invest as much as you like into this type of pension, and it will pay out when you reach your retirement age like a workplace pension.

Find out more information on how SIPPs work here

Is it worth starting a pension at 50?

Many people who've reached the age of 50 and have never started pension often assume that it might be too late to start one now.

But if you can start putting away from cash into a pension fund now, it can still be one of the best ways to invest for your retirement. That's because even if you have no pension at 50, going by the current State Pension age of 67, you still have 17 years to invest.

Why invest in a pension at 50?

The main advantage of using a pension fun over a stocks and share ISA, is that the government gives tax relief on money paid into your pension. HMRC will credit the income tax you pay into your pension each year, up to certain limits.

In the 2020/21 tax year, you can get tax relief on private pension contributions worth up to 100% of your annual earnings.

You get the tax relief automatically if your:

  • employer takes workplace pension contributions out of your pay before deducting Income Tax

  • rate of Income Tax is 20% - your pension provider will claim it as tax relief and add it to your pension pot.

You can help ensure you have the retirement you want by finding the best personal pension plan to make your money work as hard as it can.