The £40k cost of starting your pension five years late – and how to fix it - Crypto News

Those who join the workforce now are more likely to save into a pension because of auto-enrolment rules, which automatically opt you into your workplace scheme to ensure you are saving for retirement. While people can opt out, 88% of employees stay in their scheme.

If you entered the workplace before 2012, joining your pension scheme was not automatic and there wasn’t necessarily the same push to encourage you. If you forgot to sign up, then you simply missed out or ended up delaying saving for retirement.

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Started saving at 22	Started saving at 27	Started saving at 32	Started saving at 37	Started saving at 42
£210,000	£170,000	£136,000	£107,000	£82,300
Row 2 – Cell 0	-£40,000 worse off	-£74,000 worse off	-£103,000 worse off	-£127,700 worse off

If you are employed but have opted out of your workplace scheme, the first step you should take is to opt back in. That way, you will benefit from valuable employer contributions and pension tax relief on money you pay into your pension. Under auto-enrolment rules, employees who opted out of their pension scheme in the past are put back into it once every three years. They must actively opt out again if they still don’t want to be a member.
If you are self-employed and haven’t set up a personal pension, start one today. Starting small is better than paying nothing in at all. Setting up a direct debit means you won’t forget.
If you are now enrolled in a workplace pension but want to make up for lost time in your youth, consider upping your pension contributions above the standard minimum (5% employee, 3% employer). As a rule of thumb, retirement savings expert Scottish Widows recommends saving 12-15% of your salary into your pension to help achieve a comfortable retirement. This includes your personal contributions, plus your employer’s contributions and tax relief. You could also consider salary sacrifice as another tax-efficient option.
Make sure the fees you are paying are fair. Fees on workplace pensions are currently capped at 0.75%, but older funds could have higher charges, so it is important to check what you are paying. Remember to consider customer service and the investment offering as well as pure cost.
Consider your investment mix. Younger savers can afford to have more exposure to equities, which have a higher risk-return profile than less volatile assets like bonds. If you still have a long investment horizon ahead of you, make sure you aren’t de-risking too early.