A decade by decade guide to retirement saving

From getting started early to making tricky choices later on, how you make the most of your pension evolves over time.

Good news: in late 2019 it was confirmed that, for the first time since records began, the majority of people between 16 and State Pension age actively save in a private pension. ^{Footnote [1]}  

More than 10.2 million people were introduced to private pensions between 2012 and 2019,  ^{Footnote [2]} after the 2012 introduction of automatic enrolment required employers to give all eligible employees access to a workplace pension. These new savers straddle all decades, so what are the top pension tips for people of different ages?

Today, employees aged 22 and over who earn more than £10,000 are automatically enrolled into a workplace pension. You can opt out, but if you save 5% of your earnings, your employer must add a minimum of an extra 3% on top. So, on a salary of £30,000, this 3% means an extra £900 being invested for you each year. If you opt out, you’ll lose that £900. 

The best time to start a pension is as early as possible, which means that for most people in their 20s, automatic enrolment is a good thing. And it’s a common belief that you should avoid opting out except in extreme circumstances.

So, in your 20s, our top tip is simply: get into the pension-savings habit.

In your 30s, you may see your money stretched as your responsibilities grow. This could present tough financial choices. But if you want to make cutbacks, it’s often agreed that your pension should be the last place to look. By stopping or reducing your pension payments you miss out on three things: the tax benefits they bring, contributions from your employer, and potential investment growth over time. 

If it’s really necessary, a short-term reduction in the amount you save in your pension will have less effect on your pension than stopping completely. But if you really feel the need to pause your pension saving, modern pensions typically allow you to restart your contributions when you want, without additional charge. Just make sure to make a note in your diary so you don’t forget. 

For your 30s, our top tip is to protect your pension savings as much as possible, even if the other financial demands on you are great.

Your 40s are often the most financially rewarding time of your career. After the financial strain of many people’s 30s, you may be able to spend more money on yourself now. And why not? But try to make the most of your discretionary spending by putting some extra money away for your future as well as living for today.

By your 40s, you may have built up a reasonable pension pot, particularly if you’ve saved since your 20s. You’ll begin to notice that investment returns can make a big difference to the value of your pension. Try to invest a bit of time understanding the different investment options available and your own attitude towards investment risk. Investing wisely within your own risk tolerance can potentially pay dividends and make a significant difference to your retirement prospects.

Our top tip for your 40s? Dedicate some time to nurturing your pension savings.

Retirement, or a change in lifestyle, may now be in sight or at least starting to figure in your broader thoughts. Any estimates you have for your eventual retirement income will start to take on a new reality — and the closer you get to starting to take your money, the more accurate those estimated amounts become. 

Take your pension planning very seriously in your 50s. Maximise the amount you pay in and weigh up the age at which you think you may be able to afford to retire or reduce your time spent working. 

You may also want to think about reducing your pension’s exposure to investment risk. It wouldn’t be good to see the value of your savings fall heavily just before you start to access your money. So be aware of how your money’s invested and see if lower-risk options are available and whether they’d suit your needs.

Many modern pensions manage this risk automatically for you in the run-up to retirement, gradually switching out of riskier investments into lower risk investments. If you’re unsure, check whether your own pension does this and, either way, check what your options are. 

There are many ways you can access your pension savings. Pension Wise from MoneyHelper is a free, impartial, government-backed service. If you're 50 or over and you want to understand your retirement options, make it your first port of call. Visit the MoneyHelper website or call 0800 138 3944 for details. It’s also a good time to get a free State Pension forecast to see what you can expect from the state, and from what age.

For your 50s, our top tip is to get your pension ready for the home straight.

It’s quite likely that this is the time you’ll make your retirement choices — although the good news is you can access most pensions sooner than this or wait until you’re in your 70s if you prefer. These days many pensions offer great flexibility around when you start taking your money.

Your pension scheme or pension provider will probably have sent you some booklets to read. Don’t cast these aside as they contain lots of useful information.

In most cases, when you choose the sort of income you’ll take from your pension, that choice will stay with you for the rest of your life. So this decision is not one to be taken lightly. As in your 50s, you can seek the support of the government’s free Pension Wise service. 

And don’t forget, it’s illegal for your employer to force you to retire. If working beyond the State Pension age is right for you, it can be a great way to boost your income for later life.

So, in your 60s, our top tip is to consider your options carefully. That way you can help ensure you reap the greatest reward for your years of saving.