Coronavirus - we're here to help
From how to access your account online, scam awareness, your wellbeing and our community we're here to help.

Skip to main content
  • rainbow over text: 'thank you NHS'
  • Register
  • Help
  • Contact us
  • Log out of your HL account

You don’t have to be old or rich to have a pension

Starting a pension when you’re young or don’t have a high salary can seem daunting – but it doesn’t have to be. Nathan Long looks at the myths around when to start a pension and why every little helps.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

Am I too young to have a pension?

You can have a pension at any age. And you can start adding money to one no matter how much you earn.

If you’re employed and earn over £10,000 a year you’re automatically added to the company pension from the age of 22, but you can still join earlier. And if you earn £6,136 or more per year (in 2019/20), your employer has to add money to your workplace pension too.

If you earn less than £6,136 per year, your employer still has to offer you a pension and help you join. They’re not required to add money to this pension for you – but they might, so it’s worth asking.

More on pension contributions

Retirement might seem a long way off, but the earlier you start saving the better. It’s a great habit to get into, plus starting just a few years earlier can make a huge difference.

For example, someone paying in £120 per month (£150 with tax relief) could boost their pension by over £45,000 if they started saving aged 18 instead of 22 (assuming a modest growth rate of 5%, charges of 1% and a retirement age of 68).

Parents who are looking to give their children a helping hand can set up a Junior SIPP from birth. Once this is set up, anyone can contribute up to the total limit of £2,880 for the child – the child will get up to £720 in tax relief too. This makes a total contribution of £3,600.

Doing this for a newborn, for example, would leave the child with over £90,000 at the age of 18 in their pension (assuming a modest 5% growth rate and 1% charge), but would have only cost £51,840. This is just an example, the exact returns will depend on personal circumstances and the performance of the underlying investments. It should be remembered all investments can fall as well as rise in value so you could get back less than you invest.

More on Junior SIPPS

Remember pensions can only be accessed from 55 (57 from 2028). Tax rules can change and benefits depend on personal circumstances.

Do I earn enough?

When you’re already finding it hard to save money, it’s understandable that putting money into a pension might be far down your to-do list.

But adding to your pension doesn’t mean putting away hundreds each month - every little helps when it comes to saving for retirement. With HL you can add to your pension from just £25 per month, which could make a real difference to your financial future.

Regular investing

Paying an extra £25 per month from the age of 22 can boost your pension pot by around £48,000 by the time you hit State Pension age (assuming a retirement age of 68), if you assume an estimated 5% growth from your investments and 1% charge. Remember investments can fall as well as rise in value, so you could get back less than you put in.

£25 per month invested over 46 years

Scroll across to see the full chart.

Even if you’re not earning anything you can still add up to £2,880 a year and get an extra £720 in tax relief on top. So if you’re not earning but you have some spare money to put towards retirement, you could still put money in a pension and benefit from tax relief.

More on tax relief

Remember this article is not personal advice. If you need personal advice about your pension or retirement plans, we can put you in touch with an adviser.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

Editor's choice – our weekly email

Sign up to receive the week's top investment stories from Hargreaves Lansdown. Including:

  • Latest comment on economies and markets
  • Expert investment research
  • Financial planning tips
Sign up

Related articles

Category: Investing and saving

Follow your plan, not the herd

Following the crowd is rarely a good idea. It’s a particularly dangerous way to invest.

Emilie Stevens

03 Jun 2020 5 min read

Category: Investing and saving

ISA millionaire – 'You've certainly got to be prepared to take the downs as well as the ups'

One of our clients, Mr B from London, shares how he built his ISA to over £1 million.

Charlotte Wheeler

03 Jun 2020 5 min read

Category: ISAs

Millionaire habits – how others have achieved investing success

We look at the most successful habits of some of our millionaire investors, how they’ve built their fortune and what you could learn from them to grow your own wealth.

Nadeem Umar

02 Jun 2020 4 min read

Category: Retirement

How annuities can help protect your retirement income from falling stock markets

Not looking to delay your retirement? We take a closer look at how an annuity could help protect your retirement income from falling stock markets.

Isabel McDougall

02 Jun 2020 4 min read