How not to be a penniless pensioner

Written by Lisa Stanley Mann on 16th Oct 2016

This blog is an extract from our free “Good Guide to Finances at 40“, available to download now.

Pensions. Always in the news, aren’t they. And yet how many of ever really sit down and think, right, this weekend I’m going to get my pension sorted?? Yep, doesn’t happen. We’re too young to think about pensions, right? Well, no. Not ever, really, hence countless efforts from government and industry to get us saving, including the Government’s plan to enrol all eligible workers into a company scheme. But that inertia, or fear of locking away our savings for 40-odd years may now change, with news this week that the age at which we could access our state pension may be lowered

Some of us are smart enough to have started saving in a pension already. In fact, the average pension pot of a 40-year-old woman is around £15,753. Jump forward to retirement though, and that pot would only generate a ‘whopping’ £800 a year. Now, clearly, your pot would grow between your 40th birthday and when you retire and you might also expect to make many further years’ worth of contributions, but even assuming growth of 5 per cent a year over 25 years, the average woman’s pension pot would be worth £54,840.77, giving just £2,700 a year. So, if you remain “average”, your monthly income would be less than £300 when you retire. Eeek, as they say.

So let’s get ambitious. If you want to earn £20,000 a year in retirement, your fund size when you do retire would have to be £400,000. This means that from now on, you would have to save £670 a month for 25 years into something paying 5 per cent to generate your £20,000 a year retirement income.

Where do you start?


We spoke to Romi Savova, chief executive at PensionBee, for her 4 must-take steps to tackling your pension

  1. Ensure you’re automatically enrolled

The state pension is unlikely to be enough to support you in later life, as the maximum you’ll currently receive is only £155.65 per week – so £8,092 per year. What’s more the pension age is rising (it’s expected to be 68 for those poor souls in their 20s) so there could be a longer wait than you anticipate to actually claim it. With this in mind it’s vital to take up the extra pension options available.

What you can do

The new auto-enrolment rules compel your workplace to contribute towards your pension, as long as you’re paying into the scheme. The employer minimum contribution is currently 1 per cent of your annual salary, but many workplaces offer ‘contribution matching’, which means they’ll increase their contributions if you increase yours. Ensure your employer’s got you enrolled and up your own contribution if you can afford it.

Self-employed? Check out the PensionBee self-employed guide to pensions (once you’ve finished this one).

2. Find and combine your old pensions

Chances are you’ve worked in quite a few places by the time you reach your 40s, so you’re likely to have a few forgotten pensions dotted around. This could have a real impact on your savings, so it’s wise to find out where they all are. This is because this dormant cash could be sitting in a poorly-performing fund or in a scheme with horrendously high fees. Let it stay where it is and you could be damaging your pension prospects, and short-changing yourself needlessly. Although some schemes do come with valuable benefits such as guarantees – you will need to check this before moving your pot.

What you can do

Plug alert – at PensionBee we put your old pensions all into one place with our Tracker, Match and Tailored plans. Don’t know where your old pensions are? We can help you find and combine them. Alternatively, the Pension Tracing Service can give you a hand.

‘Let’s face it. Long-term saving isn’t much fun. There are thousands more exciting things to do with your money. You won’t get much immediate enjoyment from squirrelling it away, but equally there’s not much fun to be had as a penniless pensioner. It really can pay to put some money into a pension. What with tax relief and contribution matching, it can be a lucrative way to save.’

3. Get an online account

Clarity is key when it comes to saving, so it’s important to check your pension as much as possible so you know where you stand. You need to know which funds are performing, but it’s often easier said than done – many pension providers have a preference for posting documents that are tricky to decipher.

What you can do

Bit by bit the pension industry is moving into the 21st century, and there’s more online options available that really do simplify saving. Look for something that’ll easily tell you how much money is in your pension pot, as well as how your funds are performing and how much you’ll receive on retirement. This’ll make the next step infinitely easier…

4. Keep on top of your contributions

What you’re putting into your pension now will shape your later life drastically, so it’s important to find the right level of contributions and keep them up every month. Around 15 per cent of salary is a good idea, but ultimately there’s or no right or wrong sum.

What you can do

Consider at least the following when coming to your contribution level:

  • The balance of your existing pension(s) (should you have some pension pots from previous jobs)
  • Your planned retirement age
  • Your ideal retirement income

This should then give you a ballpark figure to start aiming at. Don’t believe the doom-mongers, you can still build a decent pension from your 40s.

2016 - O

Good Money Girl Rebecca O’Connor says,No more messing about, it’s time to make your pension saving a priority. It’s hard, because the benefits are not immediately visible and delayed gratification is a tough discipline to practice in a life full of stuff to spend money on, but look, you just have to. Forget keeping up with the Joneses, by the time your 70, the Joneses will be long gone and you won’t be feeling nearly as competitive.

‘While we’re at it, sustainable investments tend to be well-suited to pension saving because they involve long-term, patient growth rather than smash and grab profit raids. So your choice of pension can also be a way to do your bit for the saving of the planet.’


As with all pensions, capital is at risk. This article provides general information only. It is not financial advice. If you invest in any of the products mentioned in this article, you do so at your own risk. Capital is at risk and past performance is not a guide to future performance.

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