Starting a pension at 60 in the UK: what’s the process?

Can I start a pension at 60?

Yes, it’s definitely possible to start a pension at age 60. You can still pay into a pension at any age, and your contributions will get a boost from pension tax relief until you hit age 75. 

If your plan is to work up to the state pension age, which is rising to 67 in April 2028, you still have time to build a modest-sized pension pot. 

How much should I have in my pension at the age of 60?

According to government stats, the average pension for someone in their 60s is £86,800. However, that’s just an average figure, and many people have lower amounts saved. 

Government pension data also reveals that just over one in five people in their 60s don’t have a pension at all, so if you’re starting from scratch, then you’re not alone.

Find out if you're saving enough with our pension calculator below.

How can I maximise my pension contributions?

If you start a pension at 60, it’s vital to make the most of your contributions. 

Max out your workplace pension

If you’re employed, your workplace pension is a great place to start, as you’ll get a boost from free employer contributions. 

Here are some simple ways to maximise your workplace pension:

• Check your scheme’s small print, as some employers increase their contributions if you pay in more.

• Consider upping your pension contributions. An increase of £100 per month could add over £10,000 to your pension over 10 years.

• Consider using salary sacrifice to reduce your tax bill and increase your savings. Your pension contributions are counted as employer contributions as you give up some of your salary in exchange for higher pension payments. Although your pension contributions remain the same overall, your take-home pay increases because you pay less national insurance, giving you more spare cash to save for retirement.

If you’re employed and you don’t have a pension, then it’s possible you opted out of your employer’s scheme when you first joined.

Employers are required by law to enrol new employees in a pension automatically, but you have the option to opt out and not join the scheme.

If you think you opted out of your workplace pension in the past, you can ask to opt in again at any point by contacting your HR department. 

Use personal pensions

If you’re self-employed or don’t have access to a workplace pension, using a personal pension can offer a flexible way to save for retirement.

A self-invested personal pension (SIPP) is a popular type of personal pension that allows you to choose from a wide range of investments. Most SIPPs offer thousands of investment choices, but most also provide ready-made portfolios if you want help picking suitable investments.

Look for lost pensions

Many people have old workplace pensions they’ve forgotten about, which could potentially add thousands to their retirement wealth.

You can use the government pension tracing service to look for old workplace schemes - you just need to know the name of your old employer or pension scheme.

Can I get pension tax relief?

The good news is that you can still benefit from pension tax relief until age 75. 

This means the government tops up your contributions, so it only costs £80 to pay £100 into your pension if you’re a basic rate taxpayer and £60 to pay in £100 if you’re a higher rate one.

How does the pension allowance work?

If you’re a higher earner or you’ve received a windfall, you might want to make up for lost time and add significant amounts to your pension.

The amount you can contribute in one tax year is limited to the lower of £60,000 or your earnings in that tax year.

If you have unused allowances from the previous three tax years, you can carry them forward and use them in the current tax year, although the amount you can pay in is still capped at your earnings in the current tax year.

You have to have been a member of a pension scheme for the years you are carrying forward.

Once you start withdrawing taxable income from your pension, your allowance is capped at £10,000. This lower pension allowance is known as the money purchase annual allowance.

How should I invest a pension at 60?

If you’re starting a pension at 60, planning your investing strategy is especially important. Choosing a smart investing strategy will help you maximise returns while keeping your risk level in line with your financial goals.

If you plan to stay invested in retirement and use income drawdown to take income gradually from your pension, then you could opt for a balanced portfolio with a mixture of equity and bonds. 

Diversifying your investments across a range of assets is a common way to reduce your risk as you approach retirement. Popular asset classes include equities, bonds, property, and commodities.

A diverse portfolio can reduce investment volatility as lacklustre performance in one area is often balanced out by better performance in another. 

What options do I have for withdrawing my pension?

You can start withdrawing pension income from age 55, rising to 57 in April 2028.

Here is a summary of how the main options work for withdrawing your pension:

• Tax-free lump sum: You can withdraw the first 25% of your pension tax-free. People often decide to do this first before making a decision about the rest of their pot.

• Pension drawdown: This allows you to withdraw pension income while keeping the rest invested.

• Annuity: This allows you to exchange your pension pot for a guaranteed income for life.

Who are the best pension providers for me?

Joining your employer’s pension scheme means you won’t get any choice about the pension provider.

If you’re considering setting up a SIPP or personal pension at 60, then it’s worth researching providers to see what fees and investment options they offer. 

Get expert financial advice

If you’re starting a pension at 60, then making the most of employer contributions, pension tax relief, salary sacrifice and using smart investing strategies is especially important.

Unbiased can match you with a qualified financial adviser who can help you make the most of your pension contributions and create a plan to help you get your finances on track.