Why it pays to start your pension early

With so many demands on your finances, building a pot for your retirement may not feel like a priority. 

But by starting to pay into your pension as soon as possible, you can do your future self a huge favour and give yourself a better chance of a comfortable life after work.

When to start contributing to a pension

The earlier you start paying into your pension, the more potential it has to grow.

Even investing a small amount regularly early on (and then increasing it when you can) can be more important than making larger contributions later. Your money is invested for longer and has more potential to grow, and any returns your money makes are also reinvested.

Starting early also means you make the most of tax relief. This effectively means extra money in your pension pot. For every £80 you pay in to your pension the government will add another £20. If you pay 40% tax, you can reclaim up to another £20 direct from HMRC.

Your pension will be invested and by investing regularly over a long period, you have the potential to smooth out any investment peaks or troughs. However, the value of your pension will depend on the performance of the underlying investments, so you should always be prepared for an element of risk.

Some tips to help you start adding to your pension fund

It can be difficult to find the money to put aside each month. These tips might help:

  • Make the most of any benefits your employer offers. If they will match contributions into a workplace pension, then pay in as much as you can afford to get the most out of it. 
  • If you get a pay rise, immediately increase your monthly pension contribution. If you get a bonus, consider paying at least some of it into your pension.
  • Look through your outgoings and see if there is anything you could cancel and invest the same amount regularly into your pension. Are there any subscriptions for example that you don’t use or could live without? Cancel them and add that sum to your monthly pension payments. 

Find out more tips about how to get the best income in your retirement.

If you're unsure about your pension, call 0800 622 323 to speak to an NFU Mutual Financial Adviser who can help you to make the right choices.

You should be aware that the value of investments can fall and you may get back less than you invested.

The tax treatment of pensions depends on individual circumstances and may change in the future.

NFU Mutual Financial Advisers advise on NFU Mutual products and selected products from specialist providers. When you contact us, we'll explain the advice and services we offer and the charges.

Financial advice is provided by NFU Mutual Select Investments Limited.