Act now to avoid a last-minute pension panic

Pensions and retirement
Views & insights

Saving into a pension today could help you avoid a last-minute panic later. Discover why, along with tips on how to catch up

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2 December 2021 | 4 minute read

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Many people assume things will work out when they get older, which is why we often ignore advice to exercise more, drink less alcohol and save instead of spend our money. Unfortunately, this isn’t always the case, and many of us look back wishing we’d done things differently.

This is especially so when it comes to preparing financially for the future. Our recent survey found 31% of respondents wished they’d contributed more to their pension when they were in their 30s and 40s. However, this rose to 36% among those aged 55 to 64 – ten percentage points higher than among those aged 45 to 541. It would appear that ‘pension panic’ sets in during the decade or so before retirement, with respondents wishing they had acted earlier to ensure they could enjoy life after work.

So, how could you avoid a last-minute pension panic? If you’re still a long way from retirement, then saving regularly into a pension now could help you build up a substantial pot of money at retirement, thanks to the power of tax relief and compound returns. Meanwhile, if you’re in your 50s, rest assured it’s never too late to get started – with careful financial planning, you could still save up enough to pay for the retirement you’ve been dreaming of.

Why pension saving matters

Pensions are an extremely effective way of saving for longer-term goals. Each time you pay into a personal pension, you receive basic rate tax relief of 20%, meaning a £100 pension contribution only costs you £80. If you’re a higher or additional rate taxpayer you can claim further tax relief of up to 20% and 25%, respectively, via your tax return.

You can’t withdraw money from a pension until you reach age 55 (57 from April 2028). While you must be certain you won’t need access to the money before then, it means you won’t be tempted to splash the cash on little luxuries. Over the long term, your money will have the opportunity to benefit from compound returns, where you get a return on your previous returns as well as on your initial capital.

Starting early reaps rewards

Compounding is particularly powerful if you start saving and investing from an early age. For simplicity’s sake, let’s imagine you invested £10,000 in the stock market at age 25. Our analysis shows that by age 65 your pot could be worth £70,399, assuming an annual investment return of 5% net of charges and before inflation. But if you invested the same £10,000 at age 45, it would grow to just £26,532 – that’s more than £40,000 less.

A spare £10,000 isn’t easy to come by, but the beauty of compounding is that you could build up a substantial pot of money by saving relatively small amounts on a regular basis early on. For instance, if you invested £300 per month from age 25, you could amass a pension pot worth almost £460,000 by age 65, based on the same investment growth assumptions as above. In contrast, if you waited until you were 45, you’d need to invest more than £1,100 per month to achieve a similar sized pot.

How to catch up

Starting early could help you avoid a last-minute panic in your 50s. But what if you’re already just a decade away from your planned retirement date? The good news is that building up a large pension pot could still be achievable, but only if you have a solid financial plan in place.

The first step, if you haven’t already done so, is to consider joining your workplace pension scheme. You’ll benefit from employer pension contributions in addition to making your own pension contributions, thereby helping your pot to grow faster. Paying into a workplace pension usually means you automatically get the maximum amount of tax relief available to you based on your tax rate.

Other steps to consider include diverting bonuses into your pension, and increasing pension contributions in line with any pay rises you receive. If you’ve already paid off your mortgage, you could also think about putting the amount you would have spent on mortgage repayments into your pension. Over several years, these steps could make a big difference to the amount of money you have at retirement.

It’s also worth bearing in mind that pensions aren’t the only source of income in retirement. If you’ve saved up money in ISAs, for example, these could be a valuable and tax-efficient way of funding your retirement because withdrawals are tax free. Other income sources to consider include the state pension, savings accounts, and property income.

Next steps

Everyone has a moment when they realise how much they need to save to pay for the retirement they desire. It’s a scary moment, but the sooner this happens, the better your chances are of a secure financial future. A financial adviser can help you get started, ensure you’re not making any costly mistakes, and give you peace of mind you’re doing all you can to avoid a pension panic later on. Take control of your finances by speaking to one of our financial advisers today.

1 Survey by Findoutnow, 2084 respondents, on 16 June 2021 to 17 June 2021.


The value of investments, and any income from them, can fall and you may get back less than you invested. Tax treatment depends on the individual circumstances of each client and may be subject to change in the future. Neither simulated nor actual past performance are reliable indicators of future performance. Information is provided only as an example and is not a recommendation to pursue a particular strategy. Information contained in this document is believed to be reliable and accurate, but without further investigation cannot be warranted as to accuracy or completeness.

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