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Saving for retirement often takes a backseat amidst the daily grind of budgeting, bill payments, and navigating the ongoing cost of living crisis. However, Money Saving Expert founder Martin Lewis has unveiled a simple “golden rule” to streamline the process of pension saving for everyone.
During an appearance on ITV’s This Morning, Lewis shared his invaluable advice with hosts Siân Welby and Dermot O’Leary, responding to a viewer’s query about pension contributions.
One caller, Tanya, sought guidance on whether she was putting enough money into her pension, prompting Lewis to unveil his “golden rule.”
According to Lewis, “nobody ever puts enough in their pension,” but he emphasized the importance of adhering to his “scariest pants rule of thumb.”
Elaborating on the rule, Lewis instructed viewers to calculate half of their age when they start contributing to their pension. For instance, if someone begins saving for retirement at the age of 37, they should aim to allocate 18.5% of their earnings, inclusive of any contributions from their employer, into their pension.
Using this rule, a 40-year-old should ideally be setting aside 20% of their annual income for their pension fund.
Despite acknowledging that “nobody does that,” Lewis reassured listeners, stressing that starting to save early is paramount.
Lewis also shared practical advice on tracking down past pensions from previous employers, highlighting the availability of a pension tracer tool on Gov.UK. This tool helps individuals identify which pension scheme their former employers contributed to and provides contact information for further inquiries.
Reflecting on the potential windfall from overlooked pensions, Lewis remarked, “If you’ve worked in multiple places and you’re not sure whether you had a pension or not, it’s worth doing that, I mean you could be sitting on a pension gold mine without realizing it.
Lewis’s insights offer a valuable roadmap for individuals navigating the complexities of pension planning, emphasizing the importance of proactive financial management for a secure retirement.
