Money Saving Expert Martin Lewis issues heads-up warning on pensions

Martin Lewis regularly appears on BBC Radio 5 live’s Lunch Money show to help the public with their personal finance questions. 

This week, he was talking about pensions. 

There are several schemes in the UK to save money for the future, including a government scheme and private pensions.

But the finance guru has given a terrifying warning about the amount of money needed for the future.

Martin said: “Do you want me to scare the pants off everyone?

“Take your age when you started paying money into your pension and halve it. 

“That’s the percentage of your salary for the rest of your life to give you a decent standard retirement.”

For example, someone who started paying into their pension aged 24 would need 12% of their salary for their pension. 

“It’s a very rough rule of thumb,” Martin added.

“Don’t take that as a gospel number but that was an old calculation done to roughly work out what you would need to be able to retire on two-thirds of your final salary.

“The maximum current contribution is going to be 8%, so very few people are putting enough in.”

And the finance guru had a top tip for making the most out of your pension. 

Martin continued: “If you start contributing to your pension aged 40, it’s 20%. 

“The general point is the earlier you start, the better.

“That’s the main lesson to take. Whatever you can put in when you’re younger, because of compounding, means cash younger is more effective than cash older.

“So start putting your money in soon.”

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