How To Grow Your Pension In Your 30s, 40s, 50s, And 60s

Recently, the Pensions Commission said that 15 million people in the UK aren’t saving enough for an easy retirement. That figure could rise to 19 million over time, they added.

Up to 45% of working-age adults aren’t paying into a pension at all, they added, risking a financial “cliff edge” for ageing populations.

Scottish Widows found that just under a third of UK adults are at risk of “pension poverty”, too.

Here, we asked Brian Byrnes, director of personal finance at Moneybox, whar the term means, as well as how to lower your odds of “pension poverty” from your 20s up to your 60s.

Bynes said that it’s not always as easy to measure as you might imagine.

“Pension poverty is often associated with falling below a fixed income threshold in retirement, but in reality, it is broader than that. Charities such as Age UK define pension poverty as not having sufficient resources in later life to meet basic needs or participate fully in society,” he said.

He thinks the chances of Brits facing this in older age might be rising “with declining home ownership, lower pension participation and increasing financial pressure all contributing to poorer long-term retirement outcomes”.

Still, he added, “there are simple steps people can take throughout their lives to improve their financial resilience later on”.

If you’re thinking about your pension in your 20s, Byrnes said, you’re already doing better than most.

“If you’re in full-time employment, take the time to fully understand your workplace pension. You’ll usually be automatically enrolled when you start a job, where, at a minimum, you’ll contribute 5% and your employer 3% of your salary,” he explained.

“However, many people never check what they’re paying in, and whether their employer offers matching contributions above the minimum. Increasing your contributions can be one of the most effective ways to boost your retirement savings early on.”

He said it’s a good rule of thumb to contribute a double-digit percentage of your income as soon as it’s viable.

“Some people even like to target a total contribution percentage equivalent to roughly half your age when you start saving. Small increases in your 20s can make an enormous difference later in life due to the compounding potential.”

This can be an expensive time of life, where you may be “buying a home, climbing the career ladder, starting a family or juggling rising monthly costs. Retirement can easily slip down the priority list, but this is often the decade when good habits start to really matter,” the financial expert said.

You can also experience a phenomenon called “lifestyle creep,” where any extra income gets swallowed up by day-to-day improvements, in this decade, too.

“A simple tactic to avoid some of this is to increase your pension contributions by 1% every time you receive a pay rise. You still take home more money overall, while also paying more towards your future self in the process,” he explained.

“For those moving between jobs, make sure you are staying on top of old workplace pension pots. Many people build up multiple pots over their careers and can easily lose track of them.”

A Self-Invested Personal Pension (SIPP) can consolidate pensions, making them easier to manage, cutting provider costs down to one service, and giving you a clearer view of your long-term savings.

You might be earning more in this decade, but demands might be higher too, said Brynes. Think: supporting children and older parents and covering mortgage and debt costs, while still saving for retirement.

“These are the years to perform a proper financial ‘health check’. Make use of free online financial planning tools, like retirement calculators, to check if you are meeting your financial targets while there’s still time to meaningfully course correct if needed,” he said.

And yes, consolidating your pensions is “a key one in this decade as the better the understanding you have of the fees you’re paying across your retirement savings, the more easily and accurately you can get an understanding of where you are financially, and more importantly, where you are likely to end up.”

That way, he said, you can “amend any small mistakes that become expensive later on before it is too late in the career game”.

Now’s the time to put the pedal to the metal. “Your 50s are for many, the final opportunity to meaningfully accelerate retirement savings before stepping back from full-time work,” the expert told us.

“While retirement may start to feel more real, it’s also the point where many people become far more engaged with their finances.”

You might want to do a pension audit in your 50s, too.

“Catch up on contributions, review your investment risk, and make sure your retirement plans still reflect the lifestyle you actually want. It is also important to check your National Insurance record and State Pension forecast to ensure you are on track to receive the State Pension, as gaps in contributions can materially impact retirement income later on,” said Byrnes.

“Seeking guidance or regulated financial advice before accessing your pension can therefore be hugely valuable, particularly as decisions made in your 50s can shape your financial security for the rest of your life”.

Now’s the time to protect your wealth, Byrnes advised.

“Here, it’s important to think realistically about future spending – such as household costs, outstanding mortgage payments, or healthcare costs. Tools such as Pensions UK’s Retirement Living Standards can provide a helpful overview of what average costs look like in retirement, and can give a good basis to work from for your planning.

“At this stage, you may want to consider gradually starting to shift your portfolio into safer, lower-volatility investments to prevent all your hard work over the years from being wiped out by a sudden market downturn.”