Starting a pension at 30: your complete guide

Looking to start a pension? Great! It’s the perfect time – if done right, you’ll be set up for a comfortable retirement, all thanks to starting a pension now.

Don’t worry if you haven’t got a pension at all yet, you’re still young(ish). The important thing is building up your pension from now on, not how much you’ve already saved. Although of course having a bit already in your pension pot helps.

We’re going to run through how best to start a pension, and how much you need to save each month at 30 to build the comfortable retirement you deserve.

If you’re just here for the quick answer, your best option is to open a personal pension (alongside a pension from your work if they offer you one). With a personal pension, you’ll get a massive 25% bonus from the Government on everything you pay in (free money!).

Here’s the best options:

Best personal pensions

Is it too late to start a pension at 30?

Not at all! There’s still plenty of time to build up a nice big pension pot, all ready to give you a comfortable retirement.

Everyone is unique, and so is their pension pot – whether you’ve started at 18, or 30, it doesn’t matter. The important thing is to start saving regularly (ideally monthly) from now on.

If you start later than 30, e.g. waiting until you’re 40 or even starting a pension at 50, you’ll find it much more difficult to save as much as you could if you start now, even if you save a bit more per month! That’s because of something called compound interest…

Compound interest is where the money you make (from investments within your pension), begin to make money too. And this snowballs over and over, year and year, turning small amounts into very large amounts over long periods of time.

So, the longer you’re able to save for, before you retire, the more time compound interest has to work.

How much should I have in my pension at 30?

Now, don’t panic, but it’s obviously not ideal to have nothing in your pension at 30, but it’s not the end of the world. As we’ve mentioned, there’s plenty of time to save, as long as you start a pension now, and consistently pay into it.

Did you know the average pension pot at 30 is £9,300? That’s not the recommended pension pot – that’s different for everybody, there’s no general figure at 30 (although an old rule old thumb is you should have your current salary in your pension pot by 30). 

We’re written lots about it in our guide to how much you should have in your pension at 30, but let’s run through it here too so you can get yourself on the right track to a decent pension.

First, let’s run through a few essentials, the State Pension, and the Retirement Living Standards, and after, use these to help you determine how much you’ll need to start saving per month to get the retirement you’d like.

The State Pension

The State Pension is the pension you might get from the Government when you reach State Pension age – currently 66, but expected to rise to 68 in future.

It’s not much. It’s currently £203.85 per week (which is £10,600 per year), and you’ll likely struggle to live off just this (it's a lot less than minimum wage).

You’ll qualify for the full amount if you make 35 years National Insurance contributions, and get a smaller amount if you’ve made at least 10 years worth.

It’s a great option to provide the base level retirement income, and then use your own pension to boost your retirement income further (we’ll cover that below).

Retirement Living Standards

There’s 3 retirement income levels (minimum, moderate and maximum), put together by the Pensions and Lifetime Savings Association, called the Retirement Living Standards.

You can use these to work out how much income you’d like in retirement, and therefore how much retirement savings you’ll need in your pension pot, and therefore how much you need to save per month from now on to achieve it.

Minimum

This covers all the basics in life, such as food (£54 per week), and clothes (£580 per year). You won’t be able to afford to run a car, and there’s a small amount for a week’s holiday (in the UK). It’s £12,800 per year for one person, and £19,900 for a couple.

Moderate

You’ll have a bit more for the basics (£74 per week for food) and a bit left over for small luxuries. You can afford to run an old car, and holiday in Europe for 2 weeks per year. It’s £23,300 per year for one person, and £34,000 for a couple.

Comfortable

You’ll have more freedom and financial security, with more for the essentials (£144 per week for food). You can drive a 2 year old car, and have a 3 week holiday abroad each year. It’s £37,300 per year for one person, and £54,500 for a couple.

How much you’ll need in your pension pot

All making sense so far?

So, you’ll need a rough estimation of how much you think you might like as an income when you retire, and then you can use that to estimate how big your pension pot needs to be.

A word of warning, they’re pretty hefty pension pot figures – But don’t panic! We’ll show you how your pension pot grows over time, and how to save to make the most of lots of free cash that’s added to your pension pot too.

Pension pot at retirement (and getting the State Pension)

Pension pot at retirement (without getting the State Pension)

We’re just letting you know how much you’ll likely need in your pension pot – you don’t need to save the whole amount yourself (just some of it)...

The great thing about pensions is they typically grow very large over time (that’s why 30 is a great age to start), and there’s lots of free cash to boost your pension pot too.

How much should I pay into my pension at 30?

Here’s how much you’ll need for each Retirement Living Standard (level of income), either starting a pension from now, or if you’ve already got the average pension pot of £9,300.

Minimum retirement standard (a pension pot of £103,497)

Moderate retirement standard (a pension pot of £378,907)

Comfortable retirement standard (a pension pot of £747,003)

Let’s run through these numbers.

If you’ve got no pension yet, and you want the minimum retirement income of £12,800, you’ll need a pension pot of £103,497 in addition to receiving the State Pension. 

And to build up a pension pot that size, you’ll need total monthly contributions of £140. If you’ve already got the average pension pot of £9,300, you’ll need to make monthly contributions of £120.

The good news is that your total monthly pension contributions can have lots of free cash! Let’s run through how to build up your pension pot, and pocket that free cash.

How to start a pension at 30

You’ve got 2 options to start building your pension pot (and we recommend using both if you can), a workplace pension (set up by your employer), and a personal pension (set up by you).

Workplace pension

A workplace pension is a pension set up by your employer (if you’re employed), and your pension contributions will be taken directly out of your salary each month (before you pay tax). It’s often called auto-enrolment.

If you pay in 5% on your salary each year, your employer will have to pay at least 3% in too.  It’s like a free pay rise!

And sometimes, if you’ve got a really nice employer, they’ll match your contributions further (up to a point), so if you pay in say 10%, they’ll also pay in 10%, so you get even more free money.

We recommend paying at least 5% into your workplace pension scheme, to get the free 3%, and then if your employer does match higher contributions – pay in as much as they’ll match!

After that, and for saving more that the 5%, it’s often a good idea to start paying into a personal pension…

Personal pension

A personal pension is a pension set up by you, so instead of your employer picking which pension you have to use, you get to choose which pension provider (pension company) you use.

That means you can pick one that’s easy to use, has low fees and a great track record of investing (such as PensionBee¹ for all of those reasons). And here’s all the best personal pensions for you to compare.

Sometimes a workplace pension can be a bit like being on a bad mobile phone contract – one will not many minutes or data, but pretty expensive, and you’re not able to switch deals. With a personal pension, you can choose the best contract for you, and even switch deals whenever you like.

The great thing is you also get all the great tax-free benefits as a workplace pension – every time you add money, you’ll automatically get a 25% bonus from the Government, paid straight into your pension pot. This is to refund the tax you’d already paid on your income, called tax relief.

If you earn over £50,270 per year, and pay higher rate (40%) or additional rate (45%) tax, you can also claim some of this back too (done on a Self Assessment tax return).

Your money grows tax-free too (so it can grow even more over time, and there’s no paperwork to deal with).

Plus, you can move over any old pensions you might have too (e.g. from old jobs), which is called consolidating your pension. This means you’ll never lose them in future, and you could potentially save money (with lower fees), and get better investment growth in future.

With both types of pensions (both are the 2 main types of private pensions, meaning a pension in your name rather than the State Pension), your money will be locked away until you’re 55 (57 from 2028), but when it does come to withdraw it, 25% will be tax-free. The remaining 75% will be eligible for Income Tax (the same as your salary now), so the amount you pay will depend on your income at the time.

Note: if you’re self-employed, a personal pension is your only option (but a great one). Here’s where to learn more about self-employed pensions.

Starting a pension

Pensions aren’t as complicated as you might think – these days they’re really simple.

If you’re all sorted with your workplace pension, it’s time to set up a personal pension! 

All you need to do is first find the pension provider you like. Our top pick is PensionBee¹, it’s easy to use, has low fees and a great record of investing. We also recommend Moneyfarm¹, who can provide a bit more expert help. Here’s all the best pension providers.

Then, pick from a few simple pension plan options (where your money is invested), all suited to long-term growth, and managed sensibly by experts – so there’s nothing for you to do, and you don’t need to know anything about investing, just leave it to the experts.

And then simply add your money, ideally monthly. Keep paying into it and it should grow nicely over time, all ready for that comfortable retirement you deserve.

It’s a good idea to pay in as much as you comfortably can (without overstretching yourself), so your pension pot can grow bigger, and you can benefit from all the free cash (25% bonus), building your pension pot even more.

What about a self-invested personal pension?

A self-invested personal pension, or SIPP, is a type of personal pension where instead of the experts handling things (e.g. growing your money over time), you decide which investments you want to make.

So, you can choose to buy stocks and shares (where you own a small part of a company, a share of the company), or investment funds, which are groups of lots of different investments pooled together into a single investment, and managed by an expert. Investment funds designed for pensions are often called pension funds.

You’ll still get all the great benefits of a personal pension (e.g. the 25% government bonus). And your money will grow tax-free too.

These are only recommended for experienced investors, and you can learn more and view all the best options with our best SIPP providers.

Note: you’ll also find modern pension providers are called SIPPs too – even though the experts manage things. That’s because you’re picking from a very limited range of investment options (the pension plans).

Are personal pensions safe?

Yes, it’s safe to use a personal pension. In the UK, pension providers need to be authorised by the Financial Conduct Authority (FCA). They’re the people who make sure financial companies are looking after their customers and their money.

You can check if a pension provider is authorised by the FCA by checking the FCA register.

That means your money is also protected by the Financial Services Compensation Scheme (FSCS). Which means if your personal pension provider were to go out of business, you could get up to £85,000 in compensation.

There’s more protection too – your money is actually in the investments themselves, which are held with large investment companies and banks, and held all in your name, and can only be returned to you.

However, this doesn’t mean your investments can’t go down in value, and they may do. Investing for the long-term (such as with a pension) can mean there are ups and downs along the way, but over time typically grow (very) large over time, and build a nice big pension pot ready for retirement.

Let’s recap

That’s it for starting a pension at 30. Easier than you thought? We hope so!

Don’t feel bad if you haven’t started a pension yet, 30 is still young, and there’s loads of time for your pension to grow – the important thing is start today, and start saving monthly if you can.

Ideally put away as much as you can comfortably afford, but here’s how much you’ll likely need to save per month to build a pension pot for the retirement income you’d like…

(These totals include all the free cash you get, either from your employer, or the Government with a personal pension, so you can save quite a bit less than the total each month, with the free cash making up the difference).

For the recommended minimum retirement income of £12,800 per year, it’s recommended you save £140 per month (in total), to build a pension pot of £103,497.

For a retirement income of £23,300 (moderate retirement), you’ll need to save £510 per month in total, to build a pension pot of £378,907.

For a comfortable retirement income of £37,300 per year, you’ll need to save £1,050 per month, to build a pension pot of £747,003.

And that’s if you include receiving the State Pension. If you don’t think you will, you’ll need a bigger pension pot. We’re also presuming you will retire at 68 (the standard age).

If you have got a pension pot already, you can save a bit less each month, but as you’re still young, it won’t make too much difference – still try and save as much as possible.

The best way to get started is to make the most of your workplace pension if you haven’t already. Sign up and get the 3% free cash (your employer contributions)...

After that, set yourself up with a personal pension, you’ll get to pick a great pension provider, and benefit from the 25% bonus on all your pension contributions.

Our top recommendation is PensionBee¹, it’s easy to use, has low fees and a great track record of investing (plus, you’ll get £50 added to your pension when you register through Nuts About Money). You could also check out Moneyfarm¹, they’ve got experts on hand if you want to chat through things over the phone. Or, check out all your options with our best pension providers.

And that’s it! All the best saving for your future.