Starting a pension at 40 in the UK: what’s the process?

Can I start a pension at 40?

You can start a pension at any age, and if you haven’t yet prioritised pension savings by the age of 40, there is no time like the present.

Many of us will have nearly 30 years of working life ahead of us at this age, and this means there is plenty of time for money to grow, especially given the tax advantages available when you save into a pension.

By the age of 40, you may also have pensions that you have forgotten about, from companies where you have worked for a short time, especially if you have been auto-enrolled into schemes by your employer. 

These may have more in than you realise, and you could consolidate them into the new pension that you start.

Whether this is your first ever pension or a fresh start, you’ll benefit from the same great tax perks on a pension that you start at 40.

When you pay money into your pension, the government adds back the income tax you’ve paid on it, either straight into your pension or by paying it back to you when you fill in your tax return.

For basic-rate taxpayers, the UK government automatically tops up your contributions with 20% tax relief. If you’re a higher-rate taxpayer, you can claim an additional 20%, bringing your total relief to 40%. Additional-rate taxpayers can claim up to 45% tax relief on contributions.

This tax relief makes a huge difference to how your pension grows, as over time the returns you make earn returns of their own, creating a snowball effect that means your pension grows faster and faster. 

If you start a new pension at 40, you’ll have 27 years before the age at which you can take the state pension, which is a point at which many people consider stopping work altogether.

The state pension age is currently 55, but this will soon rise to 57 and could increase further in the coming years. If you are using the state pension age as a guideline on when you could retire, that gives your money plenty of time to compound. 

By starting now, you are making that snowball effect work for you.

How big a pension do I need?

Everyone’s situation is different when it comes to retirement finances, and by 40, you might have other savings available that you will be able to use in later life, including cash in individual savings accounts (ISAs) or other savings or investments.  

You’ll be able to use these together with your pension pot to produce an income to live on when you retire. 

Everyone has different spending needs and hopes for later life, but the Pension and Lifetime Savings Association’s (PLSA) Living Standards aim to give an idea of how much money you might need in retirement depending on your planned lifestyle.

They suggest that a single person might need the following amounts every year.

• £13,400 a year for a minimum retirement: This would cover basic needs and some cheaper leisure activities. A couple would need £21,600 between them for a minimum retirement.

• £31,700 a year for a moderate retirement: This would cover eating out a couple of times a month, plus an overseas holiday and a UK break every year. A couple would need £43,900 between them for a moderate retirement.

• £43,900 for a comfortable retirement: This would cover more long weekend breaks and other spontaneous activities and leisure spending. A couple would need £60,600 between them for a comfortable retirement.

Most of us won’t have to rely solely on our private pension income to produce this, as we’ll also be eligible for the state pension from 67.

The full new state pension is due to rise to £12,547.60 a year in April 2026, and will continue to increase over time in line with inflation, wage increases or 2.5% a year, whichever is highest.

The PLSA calculates that you’ll need a pension pot of between £330,000 and £490,000 to have a moderate retirement as a single person.

If you start in your 40s and focus on pension savings, you will be giving your money time to reach this level.

Find out if you're saving enough with Unbiased’s pension calculator.

How much should I have in my pension at 40?

According to statistics published by the government’s official data provider, the Office for National Statistics (ONS), the average pension for someone aged between 35 and 44 is £39,500, while for those aged between 45 and 54, the total average amount in a pension pot is £80,000.

That shows that many people make a serious difference to the value of their pension savings in their 40s, a point at which their salary is likely to be higher than in their thirties. 

While it can be hard to make the most of pension contributions at what can be a very expensive time in your life, such as when you may have young children to provide for, it is worth prioritising contributions whenever you can.

You can use these strategies to maximise the amount of money you put in.

Max out your workplace pension

If you’re employed, one of the best ways to turbocharge your pension in your 40s is to prioritise a workplace pension. 

The rules on pensions mean that, in most cases, your employer has to pay at least 3% of your qualifying earnings into your pension as long as you pay in 5%.

If you do not pay in, or if you pay less than 5%, they can reduce their payment or not contribute at all, so you should make sure you make this contribution at a minimum.

In some cases, employers will pay more into your pension if you increase your own contributions, which is called contribution matching. This is effectively free money, so if you can up your own contributions as much as possible, it will help your money to grow.

Use a salary sacrifice scheme

If your employer offers a salary sacrifice scheme, this can put even more into your pension. Under salary sacrifice, you give up part of your salary in exchange for a larger pension contribution from your employer. 

This money is put into your pension before you pay tax and national insurance on it, saving both you and the employer money, which you can, in turn, put into your pension to grow it faster.

Use personal pensions

If you don’t have access to a workplace pension or want more flexibility, personal pensions are an excellent option. There are several types of these, including self-invested personal pensions (SIPPs) and stakeholder pensions.

A SIPP lets you choose where your money is invested, giving you control over your pension. While it doesn’t come with employer contributions, it does offer flexibility.

A stakeholder pension is a regulated product which has a cap on fees. It may be cheaper than a SIPP in some cases, but not always, and the investment choices may be more limited.

Catch up on contributions

Most people have a £60,000 annual allowance they can pay into a pension each year. Carry forward rules allow you to use the allowances for the previous three years, as long as you were a pension scheme member during those years.

If you haven’t contributed as much to your pension as you could have in your 20s and 30s, you might want to take advantage of these rules in your 40s and contribute a large lump sum to your pension.

For higher earners, the pension annual allowance reduces as your income increases. This tapering means the amount you can contribute while still benefitting from tax relief may decrease.

It’s important to be aware of this if you are a higher earner, so you may wish to take financial advice to ensure you remain within your allowance.

What are some investment strategies for starting a pension at 40?

Use these strategies for investments when you start a pension at 40.

Take the right amount of risk

When starting a pension at 40, finding the right balance between risk and growth is important.

You have less time until you need your money than someone in their 20s and 30s, but at the same time, you do not want to sacrifice potential growth by being overly conservative.

A mix of growth assets, such as equities and more stable investments, such as bonds, can help you achieve steady growth while protecting your savings.

You may need more bonds and other less volatile assets in your portfolio than a younger saver, but the right balance will also depend on whether you’re planning to retire early or not, and if you have other savings and investments for retirement.

You can work with a financial adviser to find an investment strategy that fits your retirement goals and timeline.

Spread your risk by diversifying

Diversification is key to spreading risk.

If your pension is invested in a range of asset classes, such as stocks, bonds, real estate, and commodities, it is likely to be less volatile in terms of performance, as if one area does badly, it is balanced out by the performance of other assets.

Talk to a financial adviser 

Getting your pension right is important in your 40s, as you’ll want to amass a nest egg for retirement. A qualified financial adviser can help you to do this.

Review regularly

Once you’ve started investing, it’s important to regularly review your pension. Keep an eye on performance and make adjustments as needed. 

Who are the best pension providers for me?

When looking to start a pension at 40, there are several top providers to consider.

For workplace pensions, look at providers such as Nest or Aegon. If you’re considering a SIPP, interactive investor, Vanguard, and Bestinvest are highly rated and offer competitive options with flexible investment choices. 

Each provider has its strengths, so it's essential to compare fees, investment options, and customer service to find the best fit for you.

Get expert financial advice

If you haven’t started a pension yet and you are in your 40s, you’ll want to act as quickly as possible, as you are fast reaching your peak earnings potential and still have time to make a difference to your retirement pot.

Let Unbiased match you with a professional financial adviser who can guide you through starting a pension at 40 and help you create a tailored plan for a secure retirement.