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How much should I save for my pension?

Just how much do you need to put aside to be able to enjoy your retirement? We've got the facts you need to know.


by Victoria Bischoff on Feb 01, 2012 at 10:45

How much should I save for my pension?

Hardly a day goes by without someone telling us that we're not saving enough for retirement.

So, how much should we be saving?

Unfortunately, there is no one right answer. It depends on a whole host of factors such as your age, income, circumstances, what you want to achieve and so on.

However, regardless of your situation – and ignoring the scary stats quoted by pension companies on this – the key thing to remember is that anything is better than nothing.

And what’s more, it’s never too late to start.

How old are you?

A good place to begin is your age. One frequently cited rule of thumb is to divide your age by two and save this percentage of your salary each year.

So if you’re 30, for example, you should try to save 15% of your earnings each year, if you’re 40, 20%, 50, 25% and so on.

For many people, however, this just isn’t achievable – especially if you’re still raising a family, paying for school fees, beginning to think about children’s weddings and so on. It might be a more sensible idea, therefore, to first work out how much you can realistically afford to spare each month.

What can you afford?

First, calculate your monthly income and deduct essential expenses, such as your mortgage or rent, bills, travel, food etc. Don’t forget to take into account yearly expenses such as your television licence and car insurance.

At this point, you should also consider your debts. If you still owe money on expensive credit cards and loans it may be a sensible idea to pump any extra cash into paying down these debts before you start saving. Otherwise the interest you pay on your debt will outweigh any interest you earn on savings – especially when interest rates are low, as they are now.

Some people, however, prefer the security of having some savings and would therefore rather pay off debts at a slower pace so they can afford to save too. If you’re in your twenties or thirties, you may want to prioritise paying for protection policies for your partner and children. This is entirely your decision.

Save a fiver a day

Your next step should be to look at the sum you’re left with after all the necessities have been accounted for.

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21 comments so far. Why not have your say?

Rose G

Feb 01, 2012 at 14:14

If the current lot of pensions are anything to go by, who wants to save for a pension - currently, the only people who are guaranteed an income regardless of whether your investment is actually getting you any returns are the pensions fund managers.

As for saving for a pension, what exactly am I paying NI contributions & taxes for - to aid the feckless so that they can have children they cannot afford, to go to war with countries who we cannot steal resources from, to pay for removal of breast implants for those who have more money than sense?

The pensions industry, both private & public sector have done very little in return for the money invested in them & with the financial crisis brought on by the feckless banking industry, those who have contributed to private pensions & not relying solely on state pensions are being told they will work longer, pay more in contributions & get less than those who already are collecting pensions.

With each successive governments, & lastly, we have seen corruption with the expenses scandal, who in their right minds wants to give up salaries now so that equally feckless governments come along to tell us we are not saving enough.

If we actually dealt with the problem of pay differentials between men & women, footballers & nurses, if we could all live within our means & stop using banks who charge us to get our own money, maybe we could all save our pensions under our beds, we could afford good pensions.

One thing for certain is that I would not advise anyone to take out a private pension. As for the state pension, who can actually live on it?

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Neil Chambers

Feb 02, 2012 at 10:02

How about a round up of Self Invested Pension Plans?

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Feb 02, 2012 at 11:41

Private pensions are great, as long as you put enough in, and as long as you ensure the fees are *very* low. I mainly use trackers in my SIPP, with a few REITs etc. alongside, and have overall fees of 0.4% pa.

Those who bleat that pensions are rubbish can work until state pension age, or even longer. See if I care!

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Feb 02, 2012 at 13:59

I agree with sgjhaghsdg, private pensions work. However, I don't know whether one should invest in them early in ones working life. It is probable that you will want your capital for other things (deposits for houses, children, etc.). So my suggestion is to use up as much of your ISA limits as you can afford and only put money into pension schemes when you approach retirement (say 5-10 years at most). You can still put quite a lot away tax efficiently but your only trying to guess what the government will do with your money for 5-10 years rather than 30.

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Feb 02, 2012 at 14:23

Paying into a pension is a no-brainer if one or more of these are true. 1) You will benefit from higher rate tax relief, 2) You can contribute via salary sacrifice and get a cut of the NI savings, 3) Your company will contribute if you do, 4) You'd otherwise be tempted to raid your savings from time to time.

Doing your ISAs every year (ideally S&S if you'll be saving for decades) also makes sense, but I've always tended to up my pension in preference.

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Feb 02, 2012 at 16:03

Well said sgj, rather better than paying into an insurance policy for your pension, which was the route my IFA steered me into 30 years ago.

With a SIPP, the divis add to the plan, and with the passage of time they will, if the plan is added to, will handsomely increase the amount in the pot.

If invested in solid companies, most will allow re-investment in shares, and in my instance, e.g. HSBC, the added shares handsomely increased my portfolio for that company. Pity Brown took away the tax exemption (which has been the main reason why Company pension funds are now underfunded).

As Victoria said elsewhere, a fiver a day will be a good starter. When you get used to that then double it, and if your employer matches that, that will be £6k a year.

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May 29, 2012 at 10:37

hi all sorry to but in but cant find the post part on this page

i have just retired and have some money to invest £134.000, not sure what to do with it. i will need some money with access so i can get at it if need be and may be a return on some of the other.

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Sep 03, 2012 at 21:44


i know its a bit late but ,retired play safe you will sleep better

put your money into a fixed bond with monthly /yearly interest income

and if you have not purchased fixed rate cash isa's,start now

good luck

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Anonymous 1 needed this 'off the record'

Nov 09, 2012 at 11:12

In understand that ISAs (Stock and Cash) can be taxed heavily after death, and ought to be cashed in and assigned to some kind of trust. Is this the current


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Nov 29, 2012 at 00:15

The real issue here is that the average bloke on the street doesn't trust the financial institutions ... he has (probably) worked hard for his money and all he sees and hears is that financial managers are rewarded with large bonuses. A pension is a persons lifeline - a means to survive in old age, but I don't see any evidence of guarentees when people are looking to find and contribute to a pension plan. Probably better to keep your hard earned cash under your own control & manage your own pension with disipline.

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bb 42

Jul 05, 2013 at 13:54

what aload of bullshit what happened to those whose pensions were devastated by the .com boom. the property boom and the next boom will rob the next generation.

Invest for the long term thats what they tell the ordinary punter and after they have got all the mugs money inin april the market suddenly drops with the wealthy profit takers cashing in.

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Jul 05, 2013 at 14:49

I've been investing through all the booms and busts of the 80s, 90s, and beyond and my pensions haven't been devastated, far from it.

Of course, some people like to run with the thundering herd, buying high and selling low, but that's their problem TBH.

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bb 42

Jul 05, 2013 at 18:37

Tell that to all the Equitable Life, and people who had pp28's i think it was, with all the other pension funds.

The stock market is a gambling den it is not about investing in firms it is about getting the biggest buck in the fastest time.

I can only assume that you are one of the Mr 10% sales people who get their money even whe the public has lost theirs.

Then again you could be one of the Bank Managers who lose everything but still get £200,000 put into their pension pot on top of their multi million pay pckets.

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Jul 05, 2013 at 20:24

> The stock market is a gambling den it is not about investing in firms

Only if you do it wrong.

I'm an engineer rather than a financial person, but I understand the fundamentals of investments and pensions and am therefore able to make them work for me, which is pretty easy TBH.

I suggest you read some books (or read the Monevator web site if you prefer) and gain this understanding for yourself.

Or stick to making vitriolic under-informed rants if you find this best achieves whatever it is that you're trying to achieve.

Your call.

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bb 42

Jul 05, 2013 at 20:50

Nothing under informed the truth hurts.

How about reading do you sincerely want to be rich

Bernard Cornfield and IOS. !971 I think it was the telegraph that recommended it.

It is as true today as it was then in fact has predicted the future since then.

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Aug 06, 2013 at 09:22

Fees and charges can have a drastic impact on your pension and I have used this calculator to see how my savings / pension might be affected. Knowing how much one is leaving on the table in fees is a reason to take action!

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Roger Bacon

Aug 07, 2013 at 21:14

Its a lot to expect young people to save into a pension scheme when they see annuity rates at 3.5% for an index linked annuity at age 65 , and its mainly the capital they are getting back !. there does seem to be a good case for putting it into an ISA instead and waiting to see what happens to annuity rates later. Also pensions generally have a bad reputation because of the poor advice that has been given about portfolio mix by advisers that don't understand investments. Some advisers still think gilt funds are as safe as houses (and look what happened to them !).

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Jan 25, 2014 at 17:51

I agree with sgj that controlling your own pension investments for example in a low cost sipp with a low cost broker is a good way forward. For the uninitiated there can be expensive pitfalls along the way as surprise events unfold therefore read lots of financial articles and magazines before taking your first steps so as to keep familiar with the different areas you may wish to invest in. Start young so that you have time to recover from a few bad decisions which you are likely to make. Tread carefully taking time to choose your investments. As your fund grows you will want to diversify your investments so that if one area goes down it doesn't do too much damage to your total portfolio. Keep drip feeding, keep reading and ten years on you may just have gained sufficient confidence and nous to start increasing you exposure and choosing say individual shares alongside your trusts. Hopefully in twenty years you might even look back and think taking control of you own investments was one of the better decisions you ever made. I've just got to that stage.

And remember looking after your investments is similar to looking after your pet - its for life.

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Aug 10, 2014 at 14:46

I'm just selling a second property to help with my pension. I already have a Sipp, can I put this money in the same Sipp or a new one and draw out for an income? More next year when the new Tax laws come in.

Has anyone got any ideas?

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Rose G

Sep 10, 2014 at 10:55

Cashed in my occupational pension, but still working; have a regular income, which I would like to invest in ethical portfolio; any advise?

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Prashant Wagh

Feb 17, 2015 at 15:13

This is awesome guidance for when start save money. Actually we think oh now I am younger why fear about pensioner life. But era changes rapidly and their is need of guidance to secure future. I am always follow this site because saving, investing, planning all are hear.

I am financial planner and blogger. Currently work on for creating this blog the articles on are really help me a lot.

Thanks for aware reader about a secure future.

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