Don’t delay your pension contributions

Annabelle Williams

read 4 min

For most twenty-somethings, paying into a pension is the last thing on their minds. Managing money successfully means learning to balance today’s financial demands with putting enough aside to meet our future needs – and this is far harder for young people.

During their twenties and thirties many people have additional, immediate demands on their money, such as monthly student loan repayments, funding for master’s degrees and professional qualifications, saving for a first home and furnishing it, getting married and having children. Paying into a pension gets pushed to the bottom of the priority list.

That’s understandable, but it’s also avoiding the reality that at some point you will reach the age when you’re tired of working. You will need to have built up a nest egg big enough to live off – and if you delay when you start planning, you’re just making it harder for yourself later.

We’ve crunched the numbers and found that delaying the start of retirement saving by just a few years from the age of 25 to 30 means playing catch-up and will cost an additional £133 a month during your thirties. This is because of the way that pensions work – they have some unique features that can help people boost their wealth.

Be in it to win it

The money in pensions is invested in assets which should (hopefully) increase in value. Our calculations assume that your investments will rise by 5% – this is the middle of the forecasts from the financial services regulator, the Financial Conduct Authority. The earlier you put money into investments and the longer you ‘hold’ or own investments, the better the chances that they will increase in value – although as with everything money-related there are no guarantees with investments.

But you have to be in it to win it. And this is crucial with pensions because of the amount of money a person needs to give up work for good – we estimate an individual will need at least £13,000 a year for basic standard of living. (See below for more on how much you’ll need for a more lavish lifestyle.)

The other key benefit of pensions is that employers and the government add a top-up (in the form of pension tax relief) to money stashed in a workplace scheme. Effectively, your company covers some of that monthly contribution.

Putting off your pension – how much can it hurt?

Our analysis found that a single person aged 30 and starting a pension from scratch would have to put away £629 a month if they wanted to retire at 55 on a £13,000 annual income. If they had started at the age of 25, this figure would have been £496 a month.

To have a more comfortable retirement income of £19,000 per year, a 25-year-old would need to put £716 per month into a pension, but if they left it until 35 and still wanted to stop working at 55, it would mean putting away £1,200 a month.

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Couples tend to need slightly less to live off as they share essentials. It’s also easier to build your pension together; a couple aged 25 who put away a combined £972 a month would be able to retire aged 55 with a £26,000 income – that would give them enough for little luxuries like a holiday in Europe and gym membership. If the same couple started ten years later, aged 35, they would need to contribute £1,630 a month – a far bigger sum.

Even if it doesn’t feel like you’re putting much away initially, the sooner you start, the better. And if you can increase the amount you put into a pension when you get a pay rise or make one-off payments, your future self will be very grateful.

Get a feel for how much monthly contributions can add up to in the tables below:

Planning to retire at 55:


Single person 


   £13,000 income  £19,000 income  £31,000 income  £18,000 income  £26,000 income  £41,000 income 

Monthly contributions 

25  £496  £716  £1,165  £679  £972  £1,562 
30  £629  £908  £1,471  £862  £1,234  £1,978 
35  £830  £1,200  £1,938  £1,138  £1,630  £2,604 
40  £1,167  £1,688  £2,730  £1,602  £2,296  £3,646 
45  £1,844  £2,671  £4,323  £2,534  £3,635  £5,720 
50  £3,884  £5,630  £9,119  £5,339  £7,666  £12,026 

Planning to retire at 65:  


Single person 


   £13,000 income  £19,000 income  £31,000 income  £18,000 income  £26,000 income  £41,000 income 

Monthly contributions 

25  £332  £479  £784  £455  £655  £1,046 
30  £402  £580  £947  £550  £790  £1,266 
35  £496  £716  £1,165  £679  £972  £1,562 
40  £629  £908  £1,471  £862  £1,234  £1,978 
45  £830  £1,200  £1,938  £1,138  £1,630  £2,604 
50  £1,167  £1,688  £2,730  £1,602  £2,296  £3,646 



Nutmeg analysis:    

We assume a tax benefit of 20%. As such, somebody allocating £1,000 in a month, will see an effective allocation of £1,200 in the simulation. Growth of 5% pa is assumed in these projections. All figures take into account Nutmeg investment fees and are inflation adjusted for contributions and drawdown (increase of 2% per year). These scenarios assume that the pot will be zero at death. The state pension is not included within this given we are simulating a retirement age of 55 and 65. Length of retirement is assumed to be 30 years.  

Which? research:   

Risk warning   

As with all investing, your capital is at risk. The value of your portfolio with Nutmeg can go down as well as up and you may get back less than you invest. Projections are never a perfect predictor of future performance, and are intended as an aid to decision-making, not as a guarantee. The projection includes the effect of Nutmeg’s fees, investment fund costs, and market spread. A pension may not be right for everyone and tax rules may change in the future.  


Annabelle Williams
Annabelle is personal finance specialist at Nutmeg. She is also the author of Why Women Are Poorer Than Men, which looks at economic inequality and gender. In addition to her interest in addressing the gender gap in savings, investment and financial outlook, she is interested in the role of socially responsible investing and the moves the industry is making to offer more ESG-focused investments to retail investors.

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