7 reasons why you're not too young to start saving for your retirement

It might seem like retirement is a lifetime away, especially when you're in your 20s, 30s, or even your 40s. But the truth is, starting to save as early as possible can set you up for a brighter future. And using a pension is one of the best ways to do it. 

As with all investments, the value of a pension can go up as well as down, and you may get back less than you've paid in. 

When you're young, retirement might seem too far off to even think about - especially as you can't access your pension until 55 (or 57 from 2028). But starting to save early can have some big benefits.

Here’s seven reasons why it’s a smart move:

1. You’ll be able to get more out of compound interest. This means the interest you earn on your savings also earns interest, creating a snowball effect that can significantly increase your retirement fund over time.
2. You won’t have to scramble for funds when you're closer to retirement age. Saving now provides peace of mind for the future.
3. Early saving can give you more freedom to make choices later in life. This could mean living in your dream home, enjoying frequent outings for coffee or meals with friends, or exploring new career opportunities without financial stress.   
4. Many retirement saving plans offer tax benefits, such as tax relief on contributions or tax-free growth. Starting early maximises these benefits.
5. Committing to regular saving early can help you to start strong financial habits that boost your overall financial health, not just your retirement planning.
6. With people living longer, starting your savings early means you're better prepared to support a longer retirement period, ensuring you have enough to afford the lifestyle you want to live.
7. When you start saving earlier, you have more time to recover from any downturns in the market, so you might want to choose more aggressive investments that could yield higher returns.   

If you’re not yet started, now is the ideal time to kickstart your retirement plans.

Getting an early start on your retirement savings isn't just wise – it can be easier than you think. Here are some ways to get started.

Join your company's pension scheme

If your employer offers a pension scheme, make sure you're a part of it. They’ll have to contribute to your pension, too, and you could benefit from tax relief on the money you put in. It's one of the simplest and most effective ways to start saving for your retirement.

Consider opening a SIPP

If you don't have access to a workplace pension, for example if you're self-employed, a Self-Invested Personal Pension (SIPP) gives you more flexibility over how you save for retirement, as you can choose how much, and when, you pay in. 

You can usually choose from a wider selection of investments than a personal pension, so you can tailor your investment strategy to your long-term goals. 

If you’re interested in opening a SIPP, you can find out more about what a SIPP is and how they work here.  

Besides pensions, there are a few other ways to save for retirement that offer flexibility and benefits.

You might want to consider:

• Bonds are loans you give to a government or a company in exchange for regular interest payments, plus the return of the bond's face value when it matures in the future. They are generally considered safer than stocks but may offer lower potential returns.
• Investing in property can provide income through rent, as well as potential capital gains from property value increases. However, it requires significant capital upfront and comes with responsibilities like maintenance and finding tenants.
• Some investment products, such as an Aviva General Investment Account,  allow you to own a piece of a company in the form of stocks or shares.
• Stocks and Shares ISAs let you invest in companies tax-free. You can earn money from shares without paying tax on profits or dividends.

Visit our investments hub for a list of investment products available with Aviva. The value of investments can fall as well as rise, and you may get back less than you've paid in. If you're unsure about a decision you should speak to financial adviser. You can find one at unbiased.co.uk - there will be a charge for advice. 

ISAs and their benefits

Individual Savings Accounts (ISAs) are a popular way to save money without paying UK Income Tax or Capital Gains Tax on the interest or returns you earn. There are different types of ISAs, like cash ISAs and stocks and shares ISAs, each with its own benefits. While ISAs should not be your only way of saving for retirement, they can complement your pension savings nicely.

There are a few benefits to starting an ISA:

• Any interest earned in a cash ISA, or income and capital gains from investments in a stocks and shares ISA, are free from tax. This means you don't have to pay UK Income Tax or Capital Gains Tax on the returns from your ISA investments, allowing your savings to grow more efficiently over time.
• Some ISAs allow you to withdraw funds at any time without losing the tax benefits, unlike pensions, where access is restricted until you reach a certain age. This makes ISAs a good option for medium to long-term savings, such as buying a house.
• Stocks and shares ISAs let you invest in a wide range of options, including shares, bonds, and funds. This makes it easier to tailor your investment strategy to the level of risk you’re willing to take.
• Managing an ISA is straightforward. There's no need to declare ISA income or gains on your tax return.
• While ISAs are considered part of your estate for inheritance tax purposes, you can pass on a stocks and shares ISA or cash ISA to your spouse or civil partner tax-free. You may also be eligible for the Additional Permitted Subscription (APS), which makes it easier for grieving partners to manage their spouse or civil partner’s ISA. 

Tax benefits will depend on your circumstances and may change in the future.

By starting your retirement savings journey early, you're not just preparing for the future; you're also giving yourself the best chance at a retirement filled with freedom and choices. So, why wait? The earlier you start, the better off you'll be when it's time to enjoy the rewards of your hard work.