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Your 10-point plan for the perfect pension

Updated 24 November 2022

5min read

Nick Green
Financial Journalist

Do you tend to plan your life, or just go with the flow? When it comes to ensuring you’ve got money to spend in retirement, the only way is planning. Whether you’re just starting your career or about to end it, here are the 10 best pension tips to live by. Article by Nick Green.


‘Pension are for old people.’ Wrong! Older people draw money from pensions, yes – but it’s their younger selves who had the foresight and wisdom to pay into them. Pension planning is a young person’s game – after all, it’s not as if you’ll get another chance to do it.

The reality is that your pension will be the work of a lifetime. And like all good stories it has a beginning, a middle and an end, all of which you’ll need to be closely engaged with if you want to reap the rewards. Here’s our 10-point guide to giving your future self the retirement you deserve.

1. Start as early as you can

You should start paying into a pension as soon as you can, and pay in as much as you can reasonably afford. When you’re younger it might not seem like a priority, but this page of our website shows you just what a difference an early start can make. By allowing enough time, a lower earner can build up a pension that might make a late-starting higher earner jealous. So join your workplace pension scheme.

2. Self-employed? Then get your own pension

Self-employment in the UK is at a record high, with more than 15 per cent of workers describing themselves as self-employed. The rise in the ‘gig economy’ has also made it possible for many more people to freelance from their own homes via the web. This is great for flexibility and choice – but it does mean missing out on a workplace pension (the same is true if you work multiple low-paying jobs, which won’t qualify for auto-enrolment). Don’t assume you’ll still be happy to freelance aged 70 – ask an adviser about a personal pension.

3. Follow the savings rules of thumb

There are 4 basic rules of thumb when it comes to pension saving.

The 70 per cent rule

Broadly speaking, in retirement you can expect to be living off around 70 per cent of your average working income. This will include State Pension as well as your personal or workplace pensions, but it’s an indication of how much you’ll need to save, given that the average retirement lasts around 20 years.

The 40 year rule

You should start saving for your pension at least 40 years before your planned retirement date. If you’re starting later, you may need to save a bit more each month (see rule below).

The 12.5 per cent rule

If you save at least 12.5 per cent of your monthly salary into your pension, you should be on course for a pension pot of sufficient size (see rule below). If your employer also contributes to your pension, this should be easier to do.

The 10-times rule

You ought to have saved at least 10 times your average working-life salary by the time you reach retirement age.

4. Check your pension fund is the best for your needs

Not many people realise that they have some choice over how their pension pot is invested. Most workplace pension schemes will put your money straight into their default fund which is a one-size-fits-all set of investments. As such, you are very likely to find there is a fund better suited to your needs and attitude to risk. Your needs and attitudes may also change over time, so it is worth asking your adviser to review your pension fund regularly – and also to check it is performing to expectations.

5. Play to your strengths

Any workplace pension is great – but some are greater than others. If your employer’s one is particularly generous (e.g. matching or even doubling your contribution) then max it out as much as you can. You might not be working there forever and your next pension may not be so good, so take advantage of it while you can.

Similarly, if you move into the higher-rate tax band, there’s even more reason to increase your pension contributions. You may not be paying much extra tax (because only the top slice of your income gets taxed at 40 per cent) – and yet all your pension contributions will qualify for 40 per cent tax relief (which actually boosts each contribution by an effective 66 per cent – it’s complicated!). Now that’s what we call a pay rise.

6. Review your pension strategy as you approach retirement age

When you are 10 to 15 years from retirement, start making concrete plans about when, where and how you’d like to retire. Then review your pension pot and check that it is still on course for delivering these goals. If it isn’t, then you still have time at this stage to take appropriate action. Our Retirement Checklist can be very useful for this, as can your adviser.

7. Go for a sprint finish

Many a race is won in the home straight – and pension saving is no exception. If you’ve checked your pension 10 years from retirement (see above) and feel it needs a boost, then it may be a good time to increase contributions or transfer other savings into your pension. Why? Because pension contributions attract generous 20 per cent tax relief (or more if you're a higher-rate tax payer). Furthermore, if you’re at or near the age of 55, you know you can access your pension if you need to – making it less of a gamble to move savings into it.

8. But don’t access your pension too soon

Although you can access your pension from the age of 55, think hard before you do so. Once you’ve started to draw your pension, your annual allowance (the amount you can invest in your pension each year) drops sharply from £40,000 to £10,000. So only start drawing on your pension when you’re reasonably sure you won’t be paying much more into it. This is worth bearing in mind when considering tip 7 above.

9. Consider consolidating your pensions, especially those worth £10,000 or less

Over your career you may accumulate several workplace pensions, all with different providers. This will result in you paying multiple administration fees, when really you should only be paying one. Also, some pots will inevitably be performing less well than others. Ask an adviser about moving all your pensions into a single pot that is managed with your precise needs in mind. Your adviser will also advise you on when it’s better not to transfer a pension – such as when it comes with guaranteed benefits that would otherwise be lost.

10. Seek independent advice

There are four key points at which independent advice can make a big difference to your final income in retirement. The first is when you start saving. The right choice of pension and level of contributions at this stage can make a huge difference to the size of your pension pot. The next time you should definitely seek advice is 10 to 15 years before retirement, to sort out your retirement plans and make sure your pension is on course. It’s prudent to have another review 5 years before you retire – our Retirement Checklist will tell you more about these preparatory reviews.

The last and most important time to seek advice is at the point of retirement itself. This is when you decide how to use your pension savings to provide an income for yourself in retirement, so probably won’t be an easy or a straightforward decision. Your adviser will make sure you address all the relevant questions and can source the best products for you from the whole of the market.

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About the author
Nick Green is a financial journalist writing for Unbiased.co.uk, the site that has helped over 10 million people find financial, business and legal advice. Nick has been writing professionally on money and business topics for over 15 years, and has previously written for leading accountancy firms PKF and BDO.