Saving for retirement in your 20s and 30s

In your 20s and 30s you’ve probably got so many priorities competing for your attention that retirement may be the last thing on your mind; it may feel so far away that you can think about it later.

But, if you start saving for retirement now (with even a moderate amount), you have one great advantage over those who start later.

Time is on your side

The images below show just how much difference it could make when you start saving and investing early – even if you put in the same amount in total as someone who starts much later.

David starts investing £100 a month when he is 25; Mike invests £200 a month from the age of 45, so they both save the same £48,000 by retirement. Assuming a 5% annual return, the effect of compounding has longer to work on David’s investments, and so he ends up with almost twice as much as Mike.

Saving for retirement in your 20s and 30s
Source: Fidelity International July 2018

Reasons to start now

What you can do now

Maximise your employer contributions

If your employer offers a workplace pension, then you should consider contributing whatever is required to get the maximum employer contribution.

Set up a regular savings plan

If you are self-employed or simply want to pay more into your pension, then you can pay in and get tax relief on anything up to the annual limit of £40,000* or to 100% of your earnings if that’s lower.

Regularly review your payments

As your circumstances change, you can easily increase, stop or restart your contributions any time to suit you.

Keep pace with your salary increases

Any time you get a pay rise, think about increasing your pension contributions by the same percentage.

Bring your pensions together

As you’re likely to have already had a number of jobs you could easily end up with a dozen or more pensions by the time you retire. Tracking multiple pensions through multiple providers is tricky and time consuming, it might be easier in the long run to bring them together as you go.

If you have savings in several pensions – which is likely if you’ve changed jobs during your career – then bringing them together means you have just one company to deal with for every aspect of your income. Just be sure that if you transfer your pensions to one company, you check what charges apply and that you have access to all the income options you need.

Learn how investing can boost your chances

You can either create your own portfolio or invest in one that is ready made to increase your chances of the retirement you want, remembering of course that the value of investments can go down as well as up, so you may get back less than you invest.

What next?

If you want to open a new pension or transfer an existing pension to Fidelity, then take a look at our Self-Invested Personal Pension (SIPP). It’s low cost and easy to manage online.

*Tax relief is only available on the lower of the annual allowance (currently £40,000) or 100% of your earnings in a given tax year. If you exceed your annual allowance you may have a tax charge to pay unless you have unused allowance you can carry forward. If you have earnings of £110,000 or more, the amount you can pay in and receive tax relief on could be 'tapered' down to £10,000. Alternatively, if you’ve already taken taxable income from your pension pot under pension freedoms, your annual allowance may be £4,000 (known as the money purchase annual allowance) and you will not be able to use carry forward to contribute to a SIPP.

For more information on tax relief and all the allowances please visit our pension allowances page.

** Exit fees terms and conditions

Remember that the value of investments can fall as well as rise, so you may get back less than you invest. It’s important to understand that pension transfers are a complex area and may not be suitable for everyone. Before going ahead with a pension transfer, we strongly recommend that you undertake a full comparison of the charges, features, and services offered.

If you are in any doubt whether or not a pension transfer is suitable for your circumstances we strongly suggest that you seek advice from an authorised financial adviser.

Already have a SIPP with us?

It’s easy to increase your contributions in line with your changing circumstances. Of course you can decrease them too if you need to, but it’s a good idea to take advantage of the tax relief.

You can view your SIPP account online and change the amounts you pay in through your regular savings plan.

Remember, you can access your pension at 55

One key benefit of a pension is that you can access your pension at 55 so you are not tempted to dip in and out until you’re eligible to take your benefits. However, if you want access to your money sooner, then there are other investment options, such as an ISA, than may be more suitable.

Make life easier by bringing your pensions together

Combining your pensions into a Self-Invested Personal Pension (SIPP) can make it easier to manage your savings - and it could be cheaper, with lower fees than you’re currently paying.

Fidelity SIPP transfer factsheet

Thinking of transferring?

To find out what you should consider first, please read our Fidelity SIPP transfer guide.

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This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.

The value of investments can go down as well as up, so you may get back less than you invest. This information is not a personal recommendation for any particular product, service or course of action. Pension and retirement planning can be complex, so if you are unsure about the suitability of a pension investment, retirement service or any action you need to take, please contact Fidelity’s retirement service on 0800 368 6882, Monday to Friday, 9am - 5pm, or refer to your financial adviser. Eligibility to invest into a SIPP depends on personal circumstances and all tax rules may change in future. Pension money cannot normally be withdrawn until age 55.