KNOWING how much to save for retirement can feel like gazing into a crystal ball.
But The Sun has spoken to experts about the retirement fund rules you need to follow for each decade, which can help boost your savings.
5
Nearly nine million people in the UK will retire with an income of between £3,650 and £6,750 a year from their private pension, according to Now Pensions.
Saving as much as possible as soon as you can into a private pension is the best way to prepare.
But what else can you be doing to add to the fund and make the most of your retirement when the time comes? The Sun takes a look.
How much do I need to save?
You should save 15% of your pre-tax income into your pension every year, suggests Ed Monk, associate director at Fidelity International.
This is made up of your pension contribution and the amount added by your employee – which can vary depending on the company.
This might seem like a scary amount, but there’s a way to boost your savings and it doesn’t cost a penny more.
Most employers will set up a pension for you without you needing to ask to join – this is called auto-enrolment.
It usually happens if you work in the UK, are between 22 and the State Pension age and earn more than £10,000 a year or above the weekly and monthly earnings thresholds.
Many jobs include a default 8% of pension contributions, which is made up of the money you pay and the cash from your employer.
You should increase this amount when you can, for example, when your children move out or you pay off your mortgage.
5
Table compiled using figures from Fidelity International based on the national average salary
Ed said: “Once you leave the world of work, you’ll be living off your retirement money, hopefully for many years.
“And remember, everything’s likely to cost more in the future. Investing your money inside a pension gives it the best chance to grow to help you live comfortably in later life.”
How much should I have at different ages?
You should keep tabs on the total you have saved and consider sticking to targets for saving at different ages.
The Sun explains what you should be doing in each decade to boost your savings and make the most fo your retirement cash.
20s
Your 20s are all about laying the groundwork, warns Myron Jobson, senior personal finance analyst at Interactive Investor.
He said: “Even if you are in your 20s and focused on major financial goals like buying a property, it is important to start saving into a pension early to build up your retirement nest.
“Even small contributions can grow significantly thanks to the power of compounding.”
Compounding is when you reinvest any returns you make on your investments.
I found £40,000 in lost pension cash
SOFTWARE engineer Alex Fielder could never have imagined unearthing almost £40,000 in pension pots that he’d lost track of.
The 44-year-old, who lives in Andover, Hampshire, with his wife and two children, set about finding any forgotten funds after being made redundant back in 2021, after being furloughed.
He started hunting around for old paperwork relating to old pensions but didn’t make much progress.
One day, when he was working out of a co-working space in Andover, he got chatting to someone who knew all about Penny, an app which traces your old pension pots, and decided to give it a go.
After downloading the Penny app in January 2023, Alex realised he had four pots that he’d lost track of, dating back to 2002.
Alex said: “There were different amounts in each, ranging up to a huge £16,000 in one.”
Discovering the cash has been a game-changer for him.
“It’s given me a much clearer idea of how much I need to save between now and the end of my working life to enjoy a decent retirement.”
This can have a snowball effect, which allows small amounts of money to grow into larger sums over time.
One way to do so is to make the most of your workplace pension.
Try and get into the habit of increasing your pension contributions whenever you get a pay rise, if you can afford to do so.
30s
5
By the age of 30, you should have one year’s worth of your salary saved.
For example, if you receive the national average salary of £37,430 a year then you would aim to have this squirrelled away by your 30th birthday.
It can be difficult to put aside money in your 30s as you may have several competing financial priorities, including trying to buy a home or raise a family.
But it’s important not to forget about your pension.
Myron said: “It’s crucial not to sideline your retirement savings.
“Aim to step up your pension contributions if you can and consolidate your old pensions if appropriate – it can make managing your retirement pot much simpler.”
40s
5
By the age of 40, you should try to save two times your annual salary.
This would be £74,860 for the same worker if they did not receive a pay rise in the interim period.
If you have fallen behind on your savings, then your 40s are a good time to ramp it up.
Myron suggests you increase your pension contributions as your salary rises or your debts, including your student loan, are paid off.
Track down any old pensions from previous jobs so they do not get forgotten.
He adds: “It’s also worth thinking more seriously about what kind of lifestyle you want in retirement – and what that will realistically cost.”
To find a missing pension, first list all the places you have worked.
Then look for old paperwork that lists the name of your pension provider.
Most pension schemes will send you a statement every year.
You can use this information to find their contact details.
Once you have a list of all your pension providers then use their details to contact each one.
They may ask you for your National Insurance number, previous names and addresses, the dates you worked for the company and when you think the pension was set up.
They should be able to find the pension and let you know how much money is in it.
50s
At 50, work towards saving four times your salary.
By this point, a worker who is paid the national average salary should have £149,720 stashed away.
Use a pension calculator to check that you are on track and if not, think about increasing your contributions.
You should get a full State Pension forecast to see what you are entitled to.
You can do this on the GOV.UK website by visiting: gov.uk/check-state-pension.
Think about plugging gaps in your National Insurance record to boost the amount of state pension you will get.
You need 35 years of National Insurance contributions to get the full new state pension, which is worth £230.25 a week.
But some people have gaps in their record, for example, if they were employed but had low earnings, were unemployed and were not claiming benefits or lived outside of the UK.
You need at least ten qualifying years to get any state pension.
But you can only pay voluntary National Insurance contributions for the past six years and have until April 5 each year to do so.
For example, you have until April 5, 2031 to make up gaps for the 2024/25 tax year.
You can check if you have any gaps in your record and top up by signing into your gov.uk account.
60s
5
Your 60s are an important time to focus on your pension as you near retirement age.
Myron warns: “Now it’s about putting your plans into action.
“Decide when and how you want to retire – you don’t have to stop working completely.”
Think about how you will access your pension, as different strategies have different tax implications.
Try and save six times your salary by your 60th birthday, which is £224,580 for someone earning the national average salary.
Keep an eye on your spending to make sure your savings last.
Myron also suggests now is a good time to seek advice.
“Consider getting financial advice,” he said.
Track down lost pensions
Around £64billion is sat in lost pension accounts, according to pension tracing service Gretel.
It has calculated that more than 3.3 million people have lost or forgotten pensions, worth £19,400 each.
The average person could have as many as two or three lost pensions, according to industry estimates.
Duncan Stevens, CEO, Gretel said: “It’s surprisingly easy to lose track of a pension — we change jobs, move house, and our contact details get left behind.
“Auto-enrolment means most people will have multiple pensions, but without actively keeping track, these pots can easily go astray.”
A pension from a decade ago could now be worth thousands, he warns.
You can use Gretel to find and recover your lost accounts in minutes.
For more information visit gretel.co.uk.
“A few tailored tips could help you avoid costly mistakes.”
If you save well, you should have £262,010 by the time you retire.
How can I make sure I’m on track?
Make sure to max out your employer contributions, advises Ed Monk.
He said: “If your boss offers a workplace pension, chip in enough to get the most they’ll match.”
For example, you may be paying 5% and your employer pays 3%, which brings your total contributions up to 8%.
But if you increase your contributions to 6% then your employer may pay 4%, pushing up your total to 12%.
He also suggests that you should set up regular savings, so you are not tempted to spend the money on other things.
You can set up a direct debit or pay into your pension through salary sacrifice, which takes your contribution out of your salary before it is paid to you.
Ed said: “A regular savings plan will ensure your retirement savings are automatic and you will not be tempted to spend the money on other things.”
You can save up to £60,000 a year and get tax relief on your contributions.
Make sure to regularly check your payments and adjust your contributions to suit your needs.
For example, if you have got a pay rise then increase your pension savings by the same percentage.
Do you have a money problem that needs sorting? Get in touch by emailing [email protected].
Plus, you can join our Sun Money Chats and Tips Facebook group to share your tips and stories
