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Many of us have the goal of enjoying a comfortable life in retirement. One way to plan for this is to save into a pension. Here are the benefits of starting to do this early.
The benefits of saving into a pension early
Saving into a pension as early as possible can increase your chance of achieving your retirement goals.
Today, most people have defined contribution pensions, where the amount of retirement income you’ll get depends on how much you save into them. Given defined contribution pensions are now so common, we’ll focus on why saving into your pension early is so important if you have one of these.
Pensions are investments and the value of investments can go down as well as up, so you may get back less than you paid in.
1. Paying more into your pension typically means a larger pot
Very simply, the more you pay into your pension, the more chance there is of having a larger pot than someone who pays in less.
2. Benefit from compound growth for longer
When you save into a pension, your money is invested. This gives it the potential to grow in value. Any growth is your investment return, and in pensions these returns are typically reinvested. This offers the opportunity for growth not just on the money you pay into your pension but also on the reinvested returns – something known as compound growth.
So the earlier you start paying into your pension and investing your money, the longer you could potentially benefit from compound growth.
3. You’re less reliant on last-minute top-ups
If you get close to retiring and realise your pension won’t offer the retirement income you want or need, you’ll have limited time to top it up.
And by then, any top-ups might have to be large to make a real difference. This may not be possible financially.
Starting a pension early means that you can spread out the payments you need to make to help achieve your retirement goals over a longer period.
4. Maximise pension tax relief
You’ll generally get pension tax relief on payments into a pension (up to a set limit each year). If you’re a basic rate taxpayer, this will be 20%, but if you pay income tax above this rate, you may get additional tax relief. 1
1 Income tax rates differ depending on where you live in the UK. Tax relief depends on your individual circumstances.
5. If you’re employed, you’ll get employer contributions for longer
If you’re employed, in most cases your employer must enrol you into their workplace pension and pay into it as well if all the following apply:
- You’re between 22 and your state pension age
- You’re classed as a ‘worker’
- You earn at least £10,000 a year
- You usually work in the UK.
If you don’t meet all these criteria, you may still be able to join your workplace pension scheme, but your employer doesn’t have to pay in. Ask your employer for more information, as they may still pay in even if you don’t meet all the criteria.
Employer contributions offer a valuable boost to your pension. And the earlier you make payments into your pension that qualify for employer contributions, the more contributions you’ll get.
How much could my pension be worth in the future?
How much your pension might be worth at retirement depends on a number of things, including:
- The age you started paying in
- How much you pay in
- If you’re employed and eligible, how much your employer pays in
- The amount of pension tax relief you get
- The performance of your pension investments.
Paying into your pension early can boost many of these factors, potentially building a larger pension pot of pension at retirement than if you started saving later.
For example, paying in £100 a month for 50 years from age 18 to retirement at age 68 could build up a pension pot of more than £137,207 (assuming steady yearly growth of 3%). That’s made up of:
- £60,000 in contributions
- More than £77,000 in compounded returns.2
However, if you don’t start paying into a pension until 25 years later when you’re 43, at retirement it would only be worth £44,349 based on the same £100 monthly contribution and 3% yearly growth. That’s made up of:
- £30,000 in contributions
- Compound returns of just £14,349.2
In this example, doubling the number of years you pay into your pension more than triples the value of your pot at retirement.
| Potential pension savings value at age2 |
| Start investing at age 18 | 19 (1 year) |
21 (3 years) |
28 (10 years) |
38 (20 years) |
43 (25 years) |
53 (35 years) |
68 (50 years) |
| £1,216 | £3,760 | £13,945 | £32,685 | £44,349 | £73,547 | £137,207 |
| Potential pension savings value at age2 |
|
Start investing at age 43 |
44 |
46 |
53 |
63 |
68 (25 years) |
Retired |
| £1,216 | £3,760 | £13,945 | £32,685 | £44,349 | - |
2 For illustrative purposes only. Assumes constant returns of 3%, investments of £100 per month and that capital remains invested.
How much do I need in my pension to retire?
This depends on how much retirement income you want.
Pensions UK’s Retirement Living Standards are designed to give a meaningful picture of what level of yearly income you might need in retirement based on three different standards of living: minimum, moderate and comfortable. The current levels for a single person are:
- £13,400 for a minimum retirement
- £31,700 for a moderate retirement
- £43,900 for a comfortable retirement.
We use these figures for our pension planning calculator. This gives you a picture of what type of lifestyle you’d like in retirement and whether you’re on track to achieve this.
How you take your money in retirement may also have an impact on how much you need in your pot. For instance, if you use your pension savings to buy a secure income for life (an annuity), your age, health and location can affect the income you receive. If you want to flexibly access your pension while leaving it invested (income drawdown), you could have to reduce the income you take to stop your pension running out if investment returns are poor.
Frequently asked questions
Why do I need a pension?
In 2025/26, the maximum new State Pension is £230.25 a week or £11,973 a year.
For comparison, average weekly earnings in the UK for the three months to March 2025 were more than three times this at £722 – or £37,544 a year.3
3 Average weekly earnings in Great Britain: May 2025, Office for National Statistics
Many of us will need more than the State Pension even to cover basic living standards, never mind for a more comfortable retirement.
Find out how to check your State Pension forecast.
How do I start saving into a pension?
Here are some tips get started saving into a pension.
Check if you’re eligible to join your employer’s scheme
If you’re eligible (check the above section on employer contributions), your employer must automatically enrol you in its workplace pension and pay into it for you.
Consider a personal pension
A personal pension is typically how most self-employed people save into a pension. If you’re employed, you can also set one up separately from your workplace pension if you want.
Decide on contributions
For workplace pensions, there’s a minimum amount you must pay in as a percentage of your earnings, although you can pay in more. For personal pensions, you decide how much to pay in.
Choose a retirement age
Knowing when you want to retire gives you a goal to aim for. Your pension provider will use your chosen retirement age for calculations on your yearly pension statement. Pension statements estimate how much money you’ll have in your pension at retirement and what that might be worth in terms of yearly retirement income.
How much can I pay into a pension?
How much you can pay into a pension depends on your earnings. The amount is the larger of 100% of your relevant UK earnings or £3,600 gross (so including tax relief). This limit applies to all payments you make into a pension (or payments made by someone who is not your employer).
However, there’s an upper limit on how much you, your employer or anyone else can pay into your pension without a tax charge each tax year. This limit is called the annual allowance. In 2025/2026, the annual allowance is £60,000.
You may be able to carry forward unused annual allowance from previous tax years providing you have the earnings to support this. Find out more about pension allowances.
When should I start saving into a pension?
Ideally, start saving into a pension as soon as you start working. If you’re employed and eligible for your employer to pay in too, this will help build your pension savings.
The value of pensions advice
If you’re unsure about anything to do with pensions, consider speaking to a financial adviser. They can help with pension planning and show you how to get the most from your savings both before and after retirement.
Now you know the benefits of saving into a pension early, check out our other pension guides.
