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If there’s one thing many people over 50 wish they’d done differently (including me), it’s starting their pension earlier.
And it’s easy to see why. Research by PensionBee shows that the average pension pot for men over 50 in the UK is £43,954, compared with £23,962 for women. Meanwhile, research by SunLife found that 33% of women over 50 rely on the State Pension alone.
But it’s never too late to take an interest in your pension. And for those just starting their careers, there’s an even bigger opportunity: time.
So, what can younger generations learn from their parents’ pension experiences? And how could starting earlier help them build a better retirement?
Why aren't more young people saving for retirement?
Young people today have an advantage over Generation X when it comes to saving for retirement - Auto-Enrolment. Introduced in 2012, Auto-Enrolment means employers must automatically enrol eligible employees aged 22 and over into a workplace pension.
Under current rules, the minimum contribution is 8% of their ‘qualifying earnings’ - that’s their earnings between £6,240 and £50,270 (2026/27). The 8% usually includes:
5% from the employee (including 1% in government tax relief); and
The picture is also concerning for self-employed workers, who aren't automatically enrolled into a pension. An interim report by the Pensions Commission found that just 4% of wholly self-employed workers were saving into a pension, with participation even lower among younger workers.
Whether you're starting your career or helping a younger family member understand their finances, knowing the benefits of saving into a pension early could make a difference to future retirement plans.
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The tax benefits of paying into a pension
One of the biggest benefits of paying into a pension is pension tax relief. Tax relief is a government incentive that helps you save for retirement.
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. So, if you pay £100 into your pension, HMRC adds £25, bringing the total to £125.
That means £125 goes into your pension, even though you've only paid £100 from your take-home pay.
You can receive tax relief on personal (and any third party, excluding employer) contributions up to 100% of your salary, capped at £60,000 (2026/27).
If you earn less than £3,600, or don't earn anything at all, you can still receive tax relief on pension contributions up to £3,600 gross. That's £2,880 net plus a 25% tax top up.
If you run a limited company, your business may also be able to make employer pension contributions. You can still make employer pension contributions on top of personal and third party contributions to bring you up to the annual allowance of £60,000 (2026/27). Different limits may apply depending on your circumstances.
These amounts might not seem significant when you're starting your career. But over time, they could make a real difference to your pension savings.
How does compound growth help your pension?
Starting a pension early gives your savings more time to benefit from compounding. Put simply, compounding is when you generate growth on growth you've already received. Over time, this could help your pension grow faster.
Think of it like a snowball rolling down a hill. As it gets bigger, it gathers more snow. Your pension could work in a similar way, with any investment growth having the potential to generate further growth.
For example, imagine you start paying £100 a month into your pension. With pension tax relief, this could increase to £125 a month for basic rate taxpayers.
The sooner you start paying into your pension, the longer your money has to compound.
The chart below shows you the difference between starting at 20, 30, 40, and 50 years old, and what you could have by 67 years old*.
Total contributionsPension size at 67
Period
Market Event
FTSE World TR GBP (%)
4Plus Plan (%)
4Plus Plan’s inception – 6 Sept 2013
QE Tapering, China Interbank Crisis and its aftermath
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