Is it too late to start a pension at 40? 

Mouthy Money Your Questions Answered panelist, Becky O’Connor, answers a reader’s question on if it’s ever too late to start a pension. 

Q Is it too late to start a pension? I’m turning 40 next year and I’m worried I should have started earlier. 

A It’s never too late to start saving into a pension and turning 40 is a great time to focus on your retirement planning. With many working years ahead of you, you still have ample opportunity to build up a significant pension pot, particularly if you take proactive steps now. 

You might already have a pension you don’t know about too. If you’re currently employed and earning over £10,000 a year, it’s likely you have a workplace pension with your current employer and possibly others from previous jobs, thanks to the introduction of Auto-Enrolment in 2012.  

To make sure you’re not leaving any hard-earned savings behind, consider using the government’s free Pension Tracing Service or contacting your former employers directly.  

Once you have tracked down any old pensions, you might want to consider consolidating them into one pot. 

If you’re earning below the auto-enrolment threshold or are self-employed, you can still save into a pension. A private pension, such as a personal pension or self-invested personal pension, are easy to set up and typically offer flexibility in the amount you have to contribute as well as investment choices to match your risk tolerance and retirement goals. 

Mouthy Money Your Questions Answered

Saving into a pension now ensures you have a source of income when you retire, rather than having to continue working in retirement or relying solely on other investments.  

While investments like property or ISAs can be valuable in retirement, it’s important not to rely solely on one type of asset. Diversifying your savings across different vehicles, including a pension, ensures you have multiple sources of income to draw from in retirement. This approach can help protect you against market fluctuations and ensure a more stable financial future. 

One major benefit of contributing to a private pension is the tax relief offered by the government. For example, if you’re a basic rate taxpayer, every £100 you contribute is effectively increased to £125 due to HMRC’s 25% top-up. Higher-rate taxpayers can claim even more, making pension contributions a very tax-efficient way to save for retirement. 

The key to building a substantial pension is consistency. Regular contributions, even if modest, can grow significantly over time, especially when combined with tax relief and potential employer contributions. Starting at 40 means you have time on your side to benefit from compound growth, so the earlier you start, the better prepared you’ll be for a comfortable retirement. 

Becky O’Connor is the Director of Public Affairs at leading online pension provider PensionBee. She is a personal finance and investment expert and award-winning journalist with two decades of experience in journalism and communications. Becky is the Telegraph’s ‘Pensions Doctor’ and is also a columnist for the i paper. Prior to joining PensionBee, Becky was Head of Pensions at Interactive Investor, and previously acted as a spokesperson for Royal London, the mutual insurer. Becky is also the co-founder of the ethical personal finance website, Good With Money; the author of a book on sustainable investment, The ESG Investing Handbook, Chair of the Ethical Advisory Committee for Castlefield Investment Management and a fellow of the Royal Society of Arts. 

Photo credits: Pexels