Is it worth starting a pension at 60?

Yes! It’s definitely worth starting a pension at 60 – and get started as soon as you can (like today!).

Why, you ask? Well, for two main reasons, the first is that you’ll get a massive 25% bonus from the Government, on all the money you add to your pension (we’re not joking!), and even more if you’re a higher rate taxpayer (40%) or additional rate taxpayer (45%) – more on the details of that later.

The second reason, once your money is in your pension, it has the potential to grow much bigger over time – even after you retire. Your pension doesn’t have to stop growing in value as soon as you retire, it can continue to grow long after you retire, even while you withdraw from it (for your retirement income). We’ll cover the details of this below too.

If you’re heard enough already, but aren’t sure where to get started opening a pension, here’s the best pension providers, where you can get started today…

Best pension providers

Experts manage everything, you just pick which pension plan you’d like from a few simple options, and then add money.

Prefer to speak to a pension expert?

If you're a bit unsure about pensions and would prefer to speak to an expert, check out Unbiased¹ – it's a free service to find pension experts (financial advisors) in your local area.

Is it too late to start a pension at 60?

Nope! It’s never too late to start a pension, they’ve got some amazing, unique benefits that can help boost your retirement savings, even if retirement is just round the corner.

Having said that, don’t delay! The sooner you can start saving into a pension, the better off you’ll be.

Pensions typically grow in value over time, and starting earlier is of course preferred, but we’re not here to give you a bad time – just to reinforce that you should ideally be saving into a pension from now. It’s better late than never.

Pensions grow by experts investing your money, using sensible investment strategies, designed specifically for growing pensions, and your money can keep growing even after you retire, so there’s many years left for it to grow.

There’s no set retirement age you need to take your money either, as long as you’re over 55 years old (although if you’re reading this, you’re likely just a tad bit older).

That means you shouldn't really worry about investing within your pension. All you need to do is pick a great pension provider you like, and start saving…

Our top recommendation is PensionBee¹, it’s easy to use, low cost, and has a great record of growing pensions over time. Plus, we've got you a deal – you’ll get £50 added to your pension for free with Nuts About Money.

Benefits of starting a pension at 60

Pensions sound boring but are really pretty great. They’ve got some unique benefits, which are perfect to help boost your savings for retirement.

1. Build your retirement income

The main reason to save into a pension is so that you can withdraw it later in life, when you’re ready to relax and retire. 

A pension can provide the reassurance of a regular income, and to top up your retirement income above what you’ll get from the Government as part of the State Pension (if you’ve paid at least 10 years worth of National Insurance contributions, and 35 years for the full amount).

The State Pension isn’t likely to be enough to cover everything you need in retirement, it’s currently £221.20 per week, or £11,502 per year – which is below the minimum wage, and quite far below the recommended minimum retirement income of £14,400 per year (with a comfortable retirement coming in at £43,100 per year) – learn more about that with our guide to how much you’ll need in retirement.

So, saving into a personal pension (one you set up yourself) can provide that much needed extra income each year.

2. Tax-free saving

When you save into a pension, you won’t pay any tax as the money grows (like you might do if you saved into another type of account, such as a savings account).

That means your money can grow much faster over time. And, you don’t have to worry about any of the paperwork to go with it.

3. 25% government bonus

As pensions are intended to be tax-free, when you save into a personal pension (which is a pension you set up yourself, rather than your employer, called a workplace pension), you’ll get a massive 25% bonus on everything you save (we're not joking!). Money you add is called pension contributions.

This is to refund the tax you’ve already paid on your income (e.g. on your salary). It’s automatically added to your pension account by the provider (pension company).

And, if you’re a higher rate taxpayer (earning over £50,270 per year, and paying 40% tax), or an additional rate taxpayer (earning over £125,140 per year, and paying 45% tax), you can claim some of the tax paid at those rates too. You can do this on a Self Assessment tax return, and it’s technically called tax relief.

4. Keep growing in retirement

After you retire, your money doesn’t just stop growing inside your pension – it keeps growing! 

So, although you can start withdrawing from it, you’ll actually be withdrawing some of the cash your pension pot makes – and you can decide how much you want to withdraw. 

So, you could opt to leave it growing for a bit longer, or not withdraw anything if you don’t need the money (letting it build up more over time).

Note: this is only an option with something called pension drawdown, where your money stays inside your pension pot, while you withdraw from it (a popular option). The alternative option is called pension annuity, where you trade in your pension for a guaranteed income for the rest of your life (or set number of years). Learn more about these options with our guide to drawdown vs annuity.

5. Withdraw 25% tax-free

You’ll also be able to withdraw 25% of your pension completely tax-free, and you can take it as a tax-free lump sum if you like (all in one go).

With the remaining 75%, it will be taxed just like a salary (Income Tax), so the amount you’ll pay will depend on how much you withdraw from your pension (your pension income). 

You’ll still get your tax-free allowance of £12,570 per year before any tax is paid.

Note: there is a maximum tax-free withdrawal limit of £268,275 – but that’s very high (you can save lots more within a pension but you'll have to pay tax on it).

6. No Inheritance Tax

Pensions have a great advantage when it comes to Inheritance Tax – it doesn’t apply to them. Pensions remain completely separate from your ‘estate’ (which is all your money and possessions added up), and which will all count towards Inheritance Tax.

That means if you sadly pass away before 75, your family can inherit your pension completely tax-free. If you pass away after 75, it will count the same as Income Tax, which is what you pay on your salary now.

Pension limits

Before you get too carried away and start putting as much as you can into your pension (although you likely should do!), there is a limit to be aware of.

You can only save as much as your yearly salary, or £60,000 per year (whichever is lower), into your pension pot each year. This is called your annual allowance, and applies as a total of all your pensions (e.g. includes your pension from work if you have one).

So, if you’re planning to put a lot in each year, get saving ASAP.

Types of pensions

Now, we’ve been talking about personal pensions, which are pensions that you are able to set up yourself, whenever you like, and you can start saving towards your retirement.

Note: personal pensions are a type of private pension, which is a pension in your name, with all the money yours (so similar to a savings account). A workplace pension, which is a pension you’ll likely have from your job, is also a private pension.

The alternative is the State Pension, which is the pension you’ll get from the Government when you reach State Retirement age (currently 66). You’ll get this if you make at least 10 years worth of National Insurance contributions, and 35 years to get the full amount.

Personal pension vs workplace pension

If you haven’t got a workplace pension yet, and have the option to save into one, you definitely should be – and this should be your first option, because you’ll get even more free cash – by law, if you pay 5% of your salary, your employer has to pay in 3% too. It’s like a free pay rise!

With a personal pension, you don’t get the free cash from your employer, but you do get all the same tax-free saving benefits (which come in the form of the 25% government bonus we talked about earlier), and you also get the massive benefit of being able to choose your own pension provider, which you don’t have with a workplace pension.

That means you can pick a provider that’s best for you – perhaps one that’s easy to use, low cost and a great record of growing pensions over time, or even great customer support and a great phone app to manage your pension whenever you like.

If you don't know where to look, we recommend PensionBee¹, for all those reasons (and get £50 added to your pension for free if you sign up with Nuts About Money). Moneyfarm¹ is great too, and can provide expert advice for free. Or, check out all the best personal pensions.

So, if you aren’t able to get a workplace pension (to get that extra 3% from your employer), or are already saving 5% into one – then a personal pension is probably better for you, as you get the pick of all the best providers, rather than paying in extra into your work pension (usually they aren’t great and can be pretty expensive).

‍Note: if you’re self-employed, a personal pension is your only option – but a great one.

Self-invested personal pensions (SIPP)

A very popular type of personal pension is a self-invested personal pension (SIPP).

Traditionally, these were where you make the investment decisions, rather than the experts (and you can still do this), and typically for experienced investors.

These days, lots of modern pension providers are actually SIPPs, but you simply pick from easy to understand pension plans that are managed by experts, rather than making the investment decisions yourself (such as our recommended providers above).

If you did want to make your own investments, check out Interactive Investor¹ and AJ Bell¹, two of the best SIPPs out there – low cost and a huge range of investment options.

Transfer old pensions

If you’ve had some old jobs in the past, you might have some old pension pots lying around collecting dust. 

Don’t let them just sit there, you could be paying some hefty fees (automatically taken out of your pension) and they might not be growing as well as they could – plus, you might forget about them when the time comes to retire (often pension providers won’t let you know they’ve still got your pension, they like collecting the fees every month).

Bringing all your pensions together into one place (called consolidating your pension) is a great way to make sure you won’t forget about them, and makes things a lot easier to manage – and you might even benefit from much more growth over time, and potentially lower fees.

Not sure if you’ve got any old pensions or not sure where they are? Try the Government’s pension tracing service, or Gretel, a free service to help find them.

How to start a pension at 60

Convinced enough to get started straight away? Great. Your future self will really thank you. 

Starting a pension is really quite simple – here’s 3 easy steps to follow, and you’ll be all set up in no time.

1. Pick a great pension provider

We’ve made this bit easy for you, and reviewed all the best pension providers in the UK.

They’re all a bit different, with different fees, and options to save your money (called pension plans or pension funds), so it’s a great idea to have a look at which might suit you best.

Again, it's probably a good idea to check out PensionBee¹. You’ll also get £50 added to your pension for free if you sign up with Nuts About Money.

2. Pick a pension plan

Right, now it’s time to decide where your money will be saved and invested, all managed by the experts of course. 

Typically, they’ll aim to grow your money over time sensibly, all ready for retirement (and beyond), however you could decide you prefer an ethical pension plan, which can exclude things such as investments in fossil fuels.

Note: with our recommended providers, there’s only a few easy to understand options that aren’t overwhelming.

3. Add money

And finally, once you’re all set up, it’s time to add money (called making pension contributions). 

We recommend adding as much as you reasonably can to give your pension a real kick start – especially if you are over 60. You also get the massive 25% bonus from the Government automatically added to your pension.

It’s then also a good idea to set up a regular savings plan if you can, such as monthly top-ups. Adding often (even if you can't afford that much) can have a real impact on your pension pot over time. You’ll be able to pause or cancel your savings plan whenever you need to.

Ready to start your pension at 60?

It’s never too late to start saving for retirement, even at 60, you’ve got lots of time left to build up a pension pot, and using a pension means you can take advantage of all the great tax-free benefits to help you boost your retirement savings even more (such as the 25% Government bonus).

The main thing is to get started as soon as you can (like right now!). It only takes a few minutes to get started, and you could be building up your pension pot right away.

As a recap, our recommended pension provider is PensionBee¹, it’s easy to use, low cost and a great record of growing pensions over time. There’s also Moneyfarm¹, which is great too, and can provide expert advice if you’d like it.

For all the top options, check out the best pension providers, which includes providers where you can make your own investments (SIPPs).

And that’s it. Over to you to get saving!