The one-stop shop to getting your pension in order

Pensions are commonly put off in early years of adulthood but one of the most important ways you can save money for your future.

Let’s go through the very basics to get your pension in order and help you understand what to expect when you reach retirement.

Personal pensions and state pensions

During your retirement, you’ll likely be relying on a mix of income from your personal pension and the state pension. The state pension is an income provided to you by the government, which you start receiving at age 66 (but soon, a bit older). The amount you receive is based on how many years you’ve paid into national insurance, but the maximum rate for the 2025/26 tax year is £11,973.

For most people, this amount alone is not enough to get by on for the year, and they may want to retire before their state pension age. This is where personal pensions come into play. These are the kind of pensions you pay into through a workplace scheme, or through a Self-invested personal pension (SIPP). When the time comes to withdraw from a personal pension, you’ll get 25% of your pension tax free and then pay regular rates of income tax on the rest.

How do I pay into my personal pension?

If you work for a company, you may already be paying into your pension. This is because of auto-enrolment, which is a policy that includes employees in their work pension scheme unless they actively choose to opt out. This can be a pretty good deal, because as long as you are paying 4% of your income into your pension, your employer must pay in an extra 3%. You also get a tax break on pension contributions, which at the minimum contribution level, adds on another 1%. Read more about auto-enrolment.

You can always choose to opt back in if you originally opted out. And if you can afford to do so, it can be a great way to start building your pot without even thinking about it. Learn more about the perks of paying into your pension, and how it might even give you further tax breaks.

For those who are self-employed, there is still a way to save for retirement through a SIPP. Although you won’t get the extra contribution from an employer, you’ll still have access to the same tax relief from the government.

How much should I be contributing?

Like most investments, even a little bit is much better than nothing. Especially if you can start contributing to your pension early in your career, you could set yourself up well for the future, because it leaves lots of time for those investments to compound. If you contribute to your workplace pension, it’s worth checking if your employer matches contributions. Often, if you increase your contribution above the auto-enrolment minimum, they will do the same.

It can also be helpful to have an idea of how much you plan to spend in retirement, so you can have a savings goal. This can be a hard number to estimate, but as a starting point, the Pensions and Lifetime Savings Association has put together a guide to the amounts you may need each year for a minimum, moderate, and comfortable lifestyle.

You can also try creating an estimate based on your lifestyle: removing any costs you wouldn’t have anymore (like commuting) and adding in any anticipated additional spends (like extra holidays).

How should I invest my pension?

If you contribute to a workplace pension, there will be a default investment for your savings. However, because this default is trying to be useful to a large range of people, there may be an option that’s more suited to you specifically.

Generally, if you’re early on in your retirement savings journey, there's more room for risks with your investments because there’s more time for a market recovery. As you get closer to retirement, you may want to take less risk, so you have a clearer idea of how much you’ll have. If you’re thinking about changing your pension investment, you can get some more information on what to consider.

For those without a workplace pension, you can choose your own investments through a SIPP. If this feels intimidating, you can also opt for a Ready-made pension, a low-fee option with a set group of investment choices to make your decision easier.

Once you’ve chosen investments you are comfortable with, you can sit back and just keep up your contributions. Checking in just once or twice a year to ensure growth is on track can be an easy way to keep up your investing momentum and feel at ease with your pension.