Starting a pension

A pension is a long-term savings plan designed to provide an income when you retire. You set money aside — through your own contributions, your employer’s, or both — which is invested and grows over time. At retirement those savings are turned into an income to support you once you have stopped working.

Pensions come in three broad forms: workplace schemes arranged by your employer, personal pensions you set up yourself such as a SIPP, and the State Pension provided by the government based on your National Insurance record.

How much do you actually need?

Our free retirement calculator works backwards from the income you want to the pot required, and shows whether your current contributions are on track.

Tax relief

Suppose you earn £30,000 and contribute 5% — £1,500 — to your pension over the year. With basic-rate relief at 20%, only £1,200 comes out of your net pay; the government adds the remaining £300. Higher and additional-rate taxpayers can claim further relief through self-assessment, which many never do.

Employer matching

If you contribute 5% of that same salary and your employer matches it, the total going in is £3,000 rather than £1,500. Matching effectively doubles your contribution, which is why contributing below the level your employer will match is the most expensive saving decision available.

Time

Contribute £250 a month from age 30, growing at an average 5% a year, and by 65 you would have around £284,000 — from £105,000 of contributions. The remaining £179,000 is investment growth, which is what an early start buys you and a late one cannot.

Returns are not guaranteed and the figures above are illustrative, not a projection of your own pension.

It depends entirely on the life you want, but a common rule of thumb is a pot of roughly 20 times the annual income you want it to provide.

The Pensions and Lifetime Savings Association, working with Loughborough University, publishes Retirement Living Standards that put numbers to three tiers — minimum, moderate and comfortable — for singles and couples, excluding housing costs. A moderate standard covers everyday costs plus some comfort, such as an annual holiday in the UK or Europe and a regular allowance for eating out; a comfortable standard adds more travel and running two cars. The figures are revised each year, so check the current ones rather than a number you read a while ago.

Industry research consistently finds that most savers do not know what income they will need, and only a minority feel confident they are putting enough aside. Our free calculator turns the income you want into the pot required to support it, which is a more useful starting point than a percentage rule.

• Join your workplace scheme if you are eligible, and contribute at least enough to capture the full employer match.
• Check your State Pension forecast on GOV.UK so you know what baseline you are building on.
• If you are self-employed, set up a personal pension or SIPP — there is no employer to enrol you, and no one else will do it.
• Choose a contribution level you can sustain, then increase it whenever your income rises rather than absorbing the whole rise into spending.
• Check where your pension is invested — the default fund is a reasonable starting point but is not chosen for your circumstances.
• Track down old pots from previous jobs so nothing is lost, and consider whether consolidating makes sense.

Access age. The normal minimum pension age is currently 55, rising to 57 from 6 April 2028. Pension money is not available before then, which is why it complements rather than replaces accessible savings.

The annual allowance. You can normally receive tax relief on contributions up to £60,000 across all your pensions in 2025/26, or 100% of your earnings if lower. High earners may have a tapered allowance.

Tax-free cash. You can usually take 25% of your pension tax-free from the minimum age, subject to the lump sum allowance, with the balance taxed as income.

Nominate your beneficiaries. Pension death benefits are directed by your nomination form, not your will. Filling it in takes minutes and is very commonly left undone.