It’s Not Too Late to Start Saving Into a Pension if You’re Over 50

Many do not have enough in the pot, and Covid has added to the problem – but there are always options

The secret to a financially happy retirement? It’s £26,000 a year for a couple or £19,000 for a single-person household. That was the headline finding from the research by Which?, the consumer body, which surveyed almost 7,000 retirees and concluded these were the average annual incomes needed for a comfortable retirement. Which? included state pension income in its calculations (£16,000 a year for the couple and £8,000 a year for the single person is assumed), with the rest presumably having to come from other pensions. But many people are not putting away nearly enough to build up a pension pot that will produce a decent retirement income, and the coronavirus pandemic has exacerbated these problems by putting a huge strain on millions of people’s finances. Building up a decent pot can be particularly challenging for those who, for whatever reason, are late to the pension party, because they have less time to pay in, and their fund has less time to increase in value. Research shared exclusively with Guardian Money found that a quarter of over-50s don’t have a private or company pension. Among women over 50, a third have no private or company pension and are set to rely on the state for their retirement income. It's not too late to start saving Ros Altmann, a retirement expert and a former pensions minister, says you are “certainly not” too old to start saving, even if you are in your 50s. “You could save for another 15 or 20 years and benefit from long-term returns, which increases the money you have later in life,” she says. You may still have a decade or more of working life, so there is still time to pay into a pension and top up what you receive as a state pension, says Carolyn Jones, head of pensions policy and strategy at the Money and Pensions Service. “If you’re starting to save later in life, you should consider maximising your pension contributions. It can be hard to find spare money to save but if you get a pay rise or a bonus, or find you can free up some money by spending less somewhere else, think about paying a little more into your pension,” she says. If you start a new job at any point between the age of 22 and the state pension age, your employer will be obliged to put you into a workplace pension scheme where you and they pay some money in. This is known as automatic enrolment. But do not assume this will be enough to provide you with a big payout: the minimum total contribution into the scheme is 8% of your pay, regardless of your age. As an older worker, you will have much less time to pay in and much less time for the fund to grow than if you were in your 20s. How much to start saving “There is no reliable hard and fast rule” to tell you how much to pay in, Altmann says. The traditional rule of thumb is that you should set aside about half your age expressed as a percentage of income. That would mean a 50-year-old saving 25% of their salary into a pension. “But of course, none of this is accurate because it will depend on what pension you have already built up so far and what your aims are for a level of pension income that you would want,” she adds. As an example, a pension pot of £100,000 could get you a retirement income on top of your state pension of perhaps £4,000 to £5,000 a year on average. The investment company Fidelity says that to get a pot of £100,000, with a target retirement age of 67, based on a relatively cautious investment style and assuming average market performance, you would need to put away a considerable sum if you only start at age 55: about £650 a month. If you start at 45, it is a lot less: about £300 a month. Seek help from an expert/International pensions If all of this feels rather daunting, then you should seek help from an expert. Contrary to popular belief, you don't need to be rich to afford a financial planner. This help you think practically about retirement, establish your goals, and then put measures in place to achieve them. For expats living in Asia saving for retirement can be especially difficult due to the often absence of pension provision from overseas employers, uncertainty towards where they would be in the next few years, different currency to where they would like to retire and so on. Our team have helped many with portable, secure, tax efficient, international pension solutions designed specifically for modern day expats just like you. Please reach out for a complimentary/introductory overview at no cost & we'll explain just how what we do can be of benefit & positively impact decades of your life potentially.