Pension Planning at 40… – What have I learnt reaching this milestone?

Matt Rogers, Financial Adviser

When is the best time to start saving for your future?

As Financial Advisers, this is a question we will be asked by our clients. In short, it is never too late to invest in your future however, the younger you start the better.

Having recently turned 40, this is quite a poignant subject for me personally. It doesn’t seem five minutes ago since my 30th birthday and in another ten years’ time, I will be at an age where I could potentially be looking at accessing my pension within the next five to ten years.

When I was a young adult in my first full time job, my father tried to instil in me the importance of paying into a workplace pension. At the time I thought ‘why the rush’? I have another forty plus years before I need to think about retirement. However, this was one of the best lessons I learnt and has always stayed with me.

Worryingly, many individuals are most probably of the same mindset that I was in back in my early twenties as in fact one in five Britons say they have no form of private or workplace pension. – (according to a recent survey by comparison site – Source Financial Mail on Sunday 02/10/21


Being financially independent in later life makes life easier for both you and your family.

The ideal time to start paying into a pension is between the ages of 20 – 40 years old. Even small contributions into a pension can make a huge difference as any money that is put aside early has time to snowball into something much bigger.

If you pay the money into your pension yourself, or if it is taken by your employer from your pay packet, you automatically get 20% tax back from the government as an additional deposit into your pension pot.

If you are a higher-rate tax payer you can claim an additional 20%, while top-rate tax payers can claim an additional 25%.

If you are self-employed, you would need to set up your own private pension but you are still able to benefit from tax relief on contributions. However, only around 15% of the 5 million self employed people in the UK are currently saving into a private pension. (Source: Financial Mail on Sunday 2/10/21)

In addition to tax relief on pension contributions, the pension fund benefits from tax-free growth just like an ISA.

Don’t wait to start your pension – The cost of delaying!

If your present age is 30, with a retirement age of 65, by starting to pay now, you could receive a pension:

  • 31% higher than if you waited 5 years and made the same monthly payments
  • 76% higher than if you waited 10 years and made the same monthly payments
  • 21% higher than if you waited 5 years and made the same single payment
  • 47% higher than if you waited 10 years and made the same single payment

These figures are based on a Stakeholder Pension and assume a yearly investment growth rate of 5% with fund charges of 1% each year.

Tax rules can change. The value of an investment is not guaranteed and can go up as well as down depending on investment performance (and currency exchange rates where a fund invests overseas). You could get back less than you invested.

Source – Cost of Pension Delay Calculator – Scottish Widows

Many people in their 50’s think they have left it too late to invest into a pension when in fact, this is not the case. The fact that you can take money out of your pension from the age of 55 means that once you reach your 50’s and 60’s, you don’t need to lock your money away for decades to benefit from the tax advantages.

If you’ve reached your 60’s with no money set aside for your retirement, you’re not alone. Around 17% of those aged 55 and above admit to having no pension investments. (Source – Financial Mail on Sunday 02/10/21).

However, there are steps that you can take. Check that you have no pensions that you have forgotten about from former employers. It’s important that the performance and allocation of these investments are reviewed regularly as new funds may be available that offer greater growth potential.

Older pension policies potentially have higher fund charges and if your attitude to risk has changed, the funds may need to be moved to investments that better meet your needs and may benefit from lower fund charges.

Make sure that you are receiving the full state pension to which you are entitled. You may be able to top up your state pension by making voluntary contributions.

So, what can you do to start saving for your future now?

The easiest way and one which I still do now is by setting up a direct debit. By setting up a direct debit to go into a pension, you effectively ‘pay yourself first’ by looking after your future self before spending on other outgoings.

The one thing I would like you to take away from reading this is that it’s never too late to start saving for your future and it is part of my job as a Financial Adviser to help you plan and achieve your retirement goals and objectives.

It doesn’t matter if you have left building a nest egg until now, the important thing is to not put it off any longer.