• There are many financial commitments you may have during your 30s, with this decade being statistically the time you’re most likely to get married, buy a house and have children
• If you have debts, it is usually best to focus on getting them paid off before you start saving for your retirement
• At 30 you still have time to grow a significant pension pot through your workplace pension and other pensions
• Gaining additional assets in your 30s, such as buying a house, could help to increase your potential future retirement income
If you’re one of the many people who have not started saving for a pension when you turn 30, fear not – your 30s is a common time to start thinking about putting money away so that you can enjoy a comfortable retirement.
The younger you start a pension the better. You can put less in each month than if you start later to achieve the same size pot, and your savings will have a longer time to grow. While starting a pension in your 20s is ideal, fortunately at 30 you’re still young enough to make significant retirement savings, but only if you start making sensible pension choices now.
According to statistics from the Office for National Statistics (ONS), your thirties is the average age to get married and over half of 30 year olds will have children*. As well as this, the average age for a first-time buyer is 30, according to statistics from the Halifax First Time Buyer Review 2018.
This shows that life in your 30s is clearly a busy time, with a lot of your money being spent on weddings, house deposits and having children. Yet your 30s is also a time when you tend to be more established in your career and will (hopefully) be earning more than in your 20s, and you’re also less likely to be planning a gap year or having to pay expensive university fees (although you will still likely be paying back your student loan).
While your 30s can be a financially difficult time with many life events vying for whatever little money you have spare each month, and State Pension age may still feel a long way off, it is important to remember that the earlier you start saving for retirement the less you will need to put into a pension each month to build a suitable pot, so you should really start thinking about saving for your retirement now.
With so many financial pressures in your 30s, it is a good idea to evaluate your finances. This is the ideal time to find out exactly what debts you have, the interest rates you’re being charged on those debts, and how much you are paying off each month. You also need to compare your monthly income to monthly outgoings, along with what you need to put into your savings if you are saving for a house deposit or wedding. Once you know exactly what you have financially coming in and going out each month you can then see what money you have left to put into your retirement savings.
The full State Pension for 2020/21 is £175.20 per week, but this will change by the time you retire. Even if the amount increases it is unlikely that it will be enough for you to enjoy a comfortable retirement without supplementing it with an additional retirement income of your own. It should also be noted that you might not be eligible for the full State Pension when you retire – to get the full State Pension you will need to have made National Insurance contributions for at least 35 years (and you will need to have made 10 years of qualifying contributions to get any State Pension at all). You can choose to defer taking your State Pension which, although will mean working for longer, will increase the income you gain each month from your State Pension. This may be an option to consider if you are in your mid to late 30s and haven’t yet started saving for a pension, as it will not only increase your State Pension but also give you more time to save into a personal pension.
The general advice is as much as possible and as much as you can afford. If you don’t have much money to spare each month, it is better to save even a little and it will still add up in the future. When you do have extra money to spare, for example from a pay rise or as a result of clearing debt, then it is a good idea to increase your regular pension contributions or even make a one-off addition to your pension pot.
It’s also advisable to think about how much retirement income per year or month you would like to have when you retire. A number of sites can help you do this, such as this one from the Government’s Get to know your pension website.
The easiest way to start saving for retirement is to join your workplace pension scheme. As long as you are earning £10,000 or more as an employee and are aged 22 or over, you will automatically have been enrolled into your workplace pension by your employer, unless you have specifically chosen to opt out. The workplace pension is a good way to start saving for your retirement as you will contribute to your pension through a percentage of your salary, which will be taken directly out of your wage each month. Along with your contribution your employer will also have to contribute a percentage each month. As it stands, the minimum amount to be contributed is 8% – this will typically be split by employees contributing 5% and employers 3%. But each workplace pension is different and it is possible for your employer to contribute more into your pension pot, although your employer must contribute a minimum of 3%.
The workplace pension is a good way to start saving for your pension in your 30s as you benefit from your employer’s contribution, not to mention Government tax relief, plus you will be able to manage the investments your pension money is invested in – although you won’t get to decide which pension provider the plan is with (this is decided by your employer). At 30 it is likely that you will change jobs a few times before you retire, so remember that your workplace pension stays with you and always keep track of the different pensions you might accumulate over the course of your working life.
If you have the ability to save extra each month (on top of your workplace pension) it is advisable to look at setting up your own form of retirement saving. This can be done through opening a personal pension plan or saving into a high interest rate savings account such as an ISA, or even the Lifetime ISA if you want to benefit from a 25% Government bonus and are certain you won’t need to spend the money on anything other than a first home before retirement. You can find out more about these savings options by reading our guide on Planning your Pension.
When planning for your retirement in your 30s it is important to factor in additional assets. In your 30s you might be saving for a deposit for your first house or maybe have just managed to get onto the housing ladder, and your house can be used towards funding your future retirement. If you manage to pay off your mortgage before you retire you can choose to sell it and buy a smaller property, which will release a sum of money that you can use to increase your retirement income and at the same time can help to reduce your monthly outgoings by having lower bills to pay (such as for gas and electricity). If you’re unable to downsize or you simply want to stay in your own home, you could choose equity release that will release some of the value from your home to increase your retirement income – this option can involve some risk and will likely reduce the inheritance you leave behind, so when you retire it is a good idea to discuss it with a financial adviser before making a decision.
“When planning for retirement it is a good idea to get impartial advice from an independent financial adviser about which is the best option for your personal circumstances.”
*In 2016 ONS statistics found that the average age for women to marry men was 35.5 and the average age for men to marry women was 37.9. In 2015 in a different report ONS found that 53% of all live births in England and Wales were to mothers aged 30 and over and 68% to fathers aged 30 and over.
Disclaimer: This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.