Why You Are Never Too Young to Start Contributing to Your Pension

Everybody dreams of a comfortable retirement but how many of us are making active moves to ensure that when we retire, we’ll have enough money available to continue living life at a comfortable and enjoyable level? It’s all too easy to assume that worrying about a pension is something left until later in life, but the cold hard truth of it is, the sooner you start the better – the benefits of starting a retirement savings early are legion. Starting your pension as early as possible is one of the best financial decisions you can make, but it doesn’t come without its own set of considerations. This blog explores the benefits of starting a plan early and addresses the common question: “what age can you start paying into a pension?”

What Age Can You Start Paying Into a Pension?

While you’ll need to be of working age, did you know contributing to pension payments can begin at any age, even as a child? Parents or guardians can open junior pensions which allow them to start saving towards their children’s retirement right from birth. It may not be for everyone, but if you have young children and the means to contribute, there’s no better way to get the ball rolling.

Once you start earning and are over the age of 16, you can then begin contributing to your own plan and benefit from tax relief. The most significant piece of general pension advice we could ever issue is that the earlier you start, the better your pot could perform, thanks to the incredible power of compound interest. It’s one of the best benefits of starting a pension early.

The Compound Interest Advantage

Compound interest has sometimes been referred to in financial circles as the eighth wonder of the world. It’s a relatively straightforward principle too, it simply means that you earn interest, even on previously earned interest. Let’s say you have £100 in a pension, and that earns £1 interest over a period of time. Without you adding any money to the account, your next interest payment would be calculated on £101, not just the initial deposit.

This means that when you start saving early, your investments have more time to grow through compound interest. Over several decades, and with regular contributions from you, this can transform modest savings into significant sums, providing substantial foundation for retirement.

Financial Flexibility and Reduced Stress in Later Years

Perhaps the worst thing about starting a pension late is the added financial stress caused by not having a robust plan in place as you begin to approach retirement. Starting saving as early as possible will ultimately reduce your financial stress in later years and bring peace of mind about your retirement. By starting young you can also enjoy a more relaxed approach to saving, increasing and decreasing your contributions in line with your wage and any career changes along the way.

Let’s not forget there are different types. Everybody who makes the required level of National Insurance contributions will get their state pension, but many employees will also be enrolled into a workplace pension, unless they choose to opt out. If you work for yourself, you’ll need to be aware of self-employed pensions and take a much more active role in managing your contributions and investments in order to reap the benefits of starting a pension early.

Tax Benefits and Employer Contributions

Tax relief you receive on your contributions is one of the biggest advantages. If you’re employed, you’ll also benefit from employer contributions if you’re enrolled in a workplace pension scheme. This is essentially ‘free money’ that can grow over time through compound interest, significantly increasing your retirement fund.

With life expectancy on the rise, planning early prepares you for a potentially longer retirement period. This is crucial as you may need your retirement savings to last longer than previous generations. This, more than anything else, is why we need to spread the message about what age can you start paying into a pension.

While the immediate benefits are not always visible, the long-term advantages are substantial. From enjoying the fruits of compound interest to reducing future financial stress and maximising tax benefits, the reasons to start contributing as soon as possible are compelling and many. Here at KGJ, we’re poised to help you make the most of your pensions through our dedicated advisors.

However you earn your money, we can help ensure it goes as far as possible for you in retirement, giving you peace of mind that your later years will be enjoyable, relaxing and free of financial worry. Contact us today online, on 01384 390909 or via enquiries@kgjinsurance.com and we can ensure you reap the many benefits of starting a pension early.