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It’s never too late to set up a pension. When you were in your 20s and 30s you may have had other financial issues to focus on such as clearing debts, getting on the property ladder, paying for childcare or a combination of all three.
However, if you are in your 40s, 50s or even 60s and have no pension, there is still plenty you can do.
I don’t have a pension, what are my options?
If you haven’t started a pension yet, there are a number of ways you can start building a retirement income:
Check your state pension
If you have at least 10 years of National Insurance Contributions (NICs) you will be entitled to a state pension. How much you get will depend on the amount of NICs you have made. To get the full state pension you need 35 years of NICs. This doesn’t necessarily mean you need to have worked for a full 35 years. You can get credits for the years you weren’t working in some cases, for example if you were claiming child benefit, jobseeker’s allowance or carers allowance.
You can get a state pension forecast to find out how much you are on track to get.
You may also be able to boost your state pension by making voluntary contributions.
» MORE: Guide to the state pension
Start a pension now
There is no minimum amount of time you need to have paid into a defined contribution pension before you can start drawing an income from it – provided you are over 55 (57 from 6 April 2028) when you access it – so it really is never too late to start a pension.
If you are eligible for a workplace pension your employer will make contributions too. This is essentially free money, so it makes sense to start a pension, even if you will only be paying into it for a relatively short time.
When you make pension contributions you get tax relief as well. The government will refund the income tax you have paid on your contribution. This provides a nice little boost to your savings. 100% of your earnings up to a maximum of £60,000 a year into a pension, so depending on your financial position, you could build up a sizeable pension pot in a relatively short period of time.
» MORE: How to start a pension
Delay retirement
Another option if you have no pension is to delay retirement while you build up more savings. This could mean working longer while you pay as much as possible into your pension. But you could also consider deferring your state pension while you continue to work as this will result in a boost when you do start taking it.
Work part-time
Instead of delaying retirement with a full-time role you could also consider working part-time in your retirement in order to boost your income.
Get a second income
Another option is to think about other ways you can bring in extra income without having to head out to work. For example, you could take in a lodger, rent out your driveway or monetise a hobby.
How much money will I need in retirement?
This is the million-dollar question when it comes to retirement planning and there are different answers depending on who you consult. In reality it is a very personal question, only you can know what kind of lifestyle you want to have in retirement, what is realistic and how much you will actually need to live on.
Start by taking a look at your current income and outgoings. Think about the outgoings that will end when you retire. Hopefully, you will have cleared your mortgage by the time you retire, and your everyday travel, clothing and lunch costs are likely to fall when you stop heading out to the office every day. So, what outgoings will be left? You’ll need a minimum retirement income that covers these costs.
A general rule of thumb is that you’ll need around half to two-thirds of your current salary in retirement. So, if you are earning £50,000 a year before you retire, you’ll need £25,000 to £33,000 a year in retirement.
Don’t forget to factor in your state pension when working out where your retirement income will come from.
The full new state pension is £221.20 per week in the 2024/25 tax year.
How can I track down lost pensions?
The world of work today means that people move jobs more often, making it easy to lose track of pensions. It’s also possible for schemes to change, merge into other schemes, or close altogether.
If you think you’ve lost track of a previous pension, you can use the government’s Pension Tracing Service which is fairly straightforward and definitely worthwhile.
» MORE: Guide to pension tracing
Where can I go for financial advice?
If you are worried that you have left it too late to start pension planning, consider getting professional financial advice. An expert can help you make the most of your situation and still get the best pension possible for you. You can find an independent financial adviser at Unbiased or via the Personal Finance Society.
» MORE: Pension advice: Everything you need to know
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