Reaching your 50s with little or no retirement savings can be worrying, but it’s not too late to start saving into a pension for the first time.

About seven million people aged over 50 in the UK currently have no private pension savings, according to SunLife’s ‘Life Well Spent’ report, so if you’re in this position, you’re far from alone. A fifth of men, equivalent to 2.4 million people, and a third of women over 50, or 4.4 million people, are depending solely on the State Pension to fund their retirement. Read more about this in our article Millions of women aged over 50 at risk of poverty in retirement

However, if you’re in your 50s, you may be working for many years to come, with plenty of time to pay into a pension and hopefully benefit from long-term returns. You could also take advantage of pension rules that enable you to boost the amount you’re saving if you’ve an extra sum to spare.

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If you’re considering getting professional financial advice, Unbiased is offering Rest Less members a free pension review. It’s a chance to have a qualified local advisor give an unbiased assessment of your retirement savings.

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Here’s our five-step guide to starting a pension in your 50s, from working out how much you’ll need in retirement, to maximising the amount you can save.

1. Consider your current position

As a starting point, it’s worth getting to grips with your current pension position. You may find, for example, that you’ve lost track of some of your retirement savings if you’ve worked for various different employers over the years, or moved home. The good news is it’s often relatively simple to find forgotten pension pots, and you can find out how to do this in our guide to Tracing lost pensions

It’s also important to consider your State Pension entitlement, as this typically forms the bedrock of most people’s retirement incomes. The State Pension is £203.85 a week in the 2023/24 tax year (£10,600.20 per year), and you should receive the full amount if you have made 35 years’ worth of National Insurance Contributions (NICs). 

You can request a State Pension forecast to give you an estimate of how much you can expect to receive once you reach State Pension age. Bear in mind that the State Pension age is gradually being pushed back, and at present, it’s set to increase to 67 by 2029, and again to 68 between 2037 and 2039. Read more in our guides How the State Pension works and How can I get a State Pension forecast?

If you find you aren’t on track to receive the full State Pension, it may be possible to boost the amount you get. You can do this by paying voluntary National Insurance Contributions (NICs) to plug any gaps in your record. Read our article Is it worth paying to top up my State Pension?  to find out more. It’s also possible to increase your State Pension by delaying claiming it. Your State Pension increases by 1% for every nine weeks you defer receiving it, which works out at just under 5.8% for every 52 weeks. Read more in our article Deferring State Pension – How much can I get and is it worth it?

2. Work out how much you need to save

Once you’ve done the groundwork by finding out your State Pension entitlement and tracking down any forgotten pension pots, you’ll then be in a position to work out how much more you need to save. The general rule of thumb to help is to take your age, halve it, and then contribute this percentage of your salary to your pension every month for the rest of your working life. If you’re 50, for example, this works out as 25%, but of course the amount you actually need to save will depend on any other savings you have and how much income you’re likely to need in retirement. 

There are official figures that may be helpful as a guide when you’re working out how much income you need. According to the Pensions and Lifetime Savings Association’s latest Retirement Living Standards research, to have a ‘moderate’ living standard in retirement, you’ll need an income of £34,000 before tax as a couple, or £23,300 if you’re single. Read more in our article How much should I save for retirement? 

Assuming that you have a full State Pension of £10,600 a year each as a couple, for example, you would each need to produce additional pension income from your savings of about £12,800 between you for a ‘moderate’ retirement. There are plenty of online pension calculators that can help you work out how much income you may receive from your pension savings. 

For example, if you have a £100,000 pension pot each, this may be enough if you’re buying an annuity, depending on current rates. An annuity is a financial product that in return for some or all of your pension savings, will pay you a guaranteed income, either for life or a set period of time.  Once you’ve taken a £25,000 tax-free cash lump sum, you could exchange your £75,000 pension pot for an income of about £5,344 a year from an annuity at age 66, according to Aviva’s online annuity calculator. Read more in our article What income could a pension worth £100,000, £150,000 and £500,000 give you?

If you’re considering getting professional financial advice, Unbiased is offering Rest Less members a free pension review. It’s a chance to have a qualified independent financial advisor (IFA) take a look at your pension arrangements and give an unbiased assessment of your retirement savings.

The consultation is free and without obligation, but if the IFA feels you’d benefit from paid financial advice, they’ll go over how that works and the charges involved.

3. Decide how much you can afford to save

If you’re starting to save into a pension later in life, do what you can to increase the amount you put away. Draw up a budget to help find spare money to save, and if you receive an extra cash sum such as a bonus or inheritance, think about paying this into your pension. Remember, however, that you should always build up some easily accessible savings first that you can fall back on in the event of an emergency, as you won’t be able to access your pension until the age of 55 at the earliest. Read our article How to make a budget and stick to it

You can benefit from employer pension contributions if you’re paying into a workplace pension scheme. For example, if you’ve been self-employed for your working life and become an employee, your employer will be obliged to pay into a pension on your behalf under the government’s auto-enrolment scheme. The minimum total contribution into your workplace pension is 8% of your pay, no matter your age. You’ll usually pay 5% of your salary before tax (of which 1% is tax relief), while your employer will contribute 3%. This brings the total to 8% of salary, but your employer may be willing to contribute more. Read more in our guide How does pension auto-enrolment work?

Don’t forget, too, that anything you save in a pension will be boosted by government tax relief. Most pension savers automatically get tax relief on pension contributions at the basic rate of tax which is 20%, boosting an £80 contribution to £100. If you’re a higher rate taxpayer , you can claim 40% pension tax relief back, so paying £100 into your pension will cost you just £60. Read more in our article How pension tax relief works.

4. Make use of pension rules to increase the amount you save

You might be able to benefit from pension carry forward rules to boost your retirement pot if you can afford to do so. These allow you to make use of any of your unused Annual Allowance (£60,000 a year) from the previous three tax years, and receive tax relief on this sum. 

Bear in mind, though, that you cannot receive tax relief on contributions in excess of your earnings in any tax year, even using the pension carry forward rule. For example, if you earn £50,000 in a tax year, you can only contribute up to £50,000 to your pension that year, including any carried forward allowance.

You do not need to report additional contributions under carry forward to HMRC, provided you haven’t exceeded your Annual Allowance. Read more about how pension carry forward works in our article Pension carry forward explained.

5. Consider seeking professional help

Starting a pension and choosing where to invest your money can be daunting. A financial advisor can help you to take the first steps in starting to save for retirement, and guide you through the process.

If you’re aged 50 or over, you can get free guidance on the options available to you from the Government’s Pension Wise service. This service cannot offer tailored advice, however, but can help you to understand your options at retirement. Read more in our article Your pension options at retirement.

If you’re considering getting professional financial advice, Unbiased is offering Rest Less members a free pension review. It’s a chance to have a qualified independent financial advisor (IFA) take a look at your pension arrangements and give an unbiased assessment of your retirement savings.

The consultation is free and without obligation, but if the IFA feels you’d benefit from paid financial advice, they’ll go over how that works and the charges involved.

You can find out more about starting a pension in your 50s, 60s or beyond in our guide Saving into a pension for the first time.

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