Starting a pension at 50 in the UK: what’s the process?

Can I start a pension at 50?

Yes, you can start a pension at 50.

It’s easy to feel like you’ve missed the boat if you're only now considering it, but it’s not too late to start. While many people start saving earlier, starting a pension at 50 is still possible, and there are plenty of benefits.

The power of compound interest means that even starting later, your savings have time to grow. Starting a pension at 50 may mean fewer years for this growth, but even a decade or two of compounded savings can make a significant difference.

If you're wondering, “How much should I have in my pension at 50?” it's helpful to know the average pension pot at 50.

According to Forbes, the average pension savings for someone aged 45-54 is £81,200. The situation might feel daunting for those with no pensions at 50, but it's far from hopeless. 

You can still build a meaningful pension pot by making the most of every available option. 

People are also living longer, often working past traditional retirement ages. Many people are healthy and active well into their 70s and beyond, which gives you more time to contribute to your pension.

This extended working life means you can save for longer and potentially delay when you need to start drawing on your pension, giving your pot time to grow.

However, urgency and commitment are key.

At 50, there’s less room for error and every year counts. If you’re asking, “Is it worth starting a pension at 50?” the answer is yes, but you’ll need to prioritise it and make the most of the remaining time to build up your retirement savings.

How can I maximise pension contributions?

If you start a pension at 50, you can use these strategies to maximise the amount of money you put in:

Max out your workplace pension

If you’re employed, the first thing to do is to look at your workplace pension.

Many employers offer contribution matching, which means they match every pound you put in, effectively giving you free money. For those starting a pension at 50, UK schemes typically offer excellent benefits if you’re willing to contribute as much as possible.

Salary sacrifice schemes can be a great way to contribute more to your pension while reducing the income tax you pay.

Under salary sacrifice, you give up part of your salary in exchange for a larger pension contribution from your employer. You should aim to contribute as much as possible, as you have an annual pension allowance of £60,000.

Use personal pensions

If you don’t have access to a workplace pension or want more flexibility, personal pensions like a self-invested personal pension (SIPP) are an excellent option.

A SIPP lets you choose where your money is invested, giving you control over your pension. While it doesn’t come with employer contributions, it does provide flexibility in choosing the types of investments that could generate the returns you need.

Given that you're starting at 50, you may need to consider higher-risk investments for faster growth, but this comes with a trade-off of potential losses. Working with a financial adviser is crucial, as they can guide you toward an investment strategy that fits your retirement goals.

Catch-up contributions

Older savers can take advantage of unused pension allowances from previous years.

This means you can go back and ‘catch up’ on contributions for the last three years if you haven’t maxed them out, giving your savings a boost.

Tapered annual allowance

For higher earners, the pension annual allowance reduces as your income increases. This tapering means the amount you can contribute while still benefitting from tax relief may decrease.

Even with a reduced allowance, you can still make the most of your contributions and may be able to reduce your tax bill by carefully planning and seeking advice from a financial adviser.

Can I take advantage of tax relief for my pension?

One of the most significant advantages of starting a pension is tax relief on contributions.

For basic rate taxpayers, the government automatically tops up your contributions with 20% tax relief. If you’re a higher-rate taxpayer, you can claim an additional 20%, bringing your total relief to 40%. Additional-rate taxpayers can claim up to 45% tax relief on contributions.

This is a significant advantage when trying to build a pension pot quickly.

Carry forward rules

Carry forward rules allow you to reclaim unused pension contributions from the previous three years as long as you were a pension scheme member during those years.

This is especially useful for anyone starting a pension at 50, as you can immediately boost your pot by making larger contributions and claiming tax relief.

What are some investment strategies for starting a pension at 50?

Use these strategies for investments when you start a pension at 50:

Balanced risk

When starting a pension at 50, finding the right balance between risk and growth is important.

Many people think they need to reduce risk as they age, but a mix of growth assets like equities and more stable investments like bonds can help you achieve steady growth while protecting your savings.

You don’t want to be too conservative and miss out on potential returns, but also not overly aggressive, given the shorter timeline to retirement.

Be mindful of ‘lifestyling’, a strategy where your pension fund is switched to a lower-risk one as you approach retirement. While this can protect your pot, it may limit growth if you still have years before needing to access your pension.

Diversification

Diversification is key to spreading risk.

By investing in a range of asset classes, such as stocks, bonds, real estate, and commodities, you can protect your pension from volatility. A diverse portfolio reduces the impact of poor performance in one area by balancing it with better performance in others. 

Working with an adviser

Given the complexity of pension investments and that you’re starting at 50, it’s worth working with a financial adviser. They can help tailor an investment strategy to your specific situation.

Reviewing pension investments

Once you’ve started investing, it’s important to regularly review your pension. Don’t set it and forget it. Keep an eye on performance and make adjustments as needed. 

What do I need to consider for my retirement income?

To estimate how much you’ll need for retirement, consider your lifestyle and future expenses like healthcare or travel.

Typically, you’ll need around 70%-80% of your current income annually. If you're asking, "How much should I have in my pension at 50?" your target savings will depend on these needs.

Additionally, think about how you’ll access your pension and the potential tax implications of withdrawals. 

Without careful planning, taking too much out too quickly could increase your tax bill. It's worth seeking financial advice to help minimise taxes and set realistic savings goals.

State pension

The state pension will provide some retirement income, but it’s unlikely to be enough.

The new state pension currently pays up to £221.20 a week. It’s important to factor in the state pension as a supplement to your savings rather than relying on it entirely.

Pension drawdown

Pension drawdown allows you to take income from your pension while keeping the rest invested. This gives you flexibility in how much you take out and when.

However, it’s crucial to manage your withdrawals carefully to ensure you don’t deplete your pension pot too quickly.

Annuities

An annuity offers a guaranteed income for life or a fixed term and can be useful for those seeking certainty in their retirement income.

Consider annuities as part of a broader retirement plan if stability is your priority.

Who are the best pension providers for me?

When looking to start a pension at 50, there are several top providers to consider.

For workplace pensions, look at providers such as Nest or Aegon. If you’re considering a SIPP, interactive investor, Vanguard, and Bestinvest are highly rated and offer competitive options with flexible investment choices. 

Each provider has its strengths, so it's essential to compare fees, investment options, and customer service to find the best fit for you.

Get expert financial advice

Starting a pension at 50 may seem daunting, but it’s far from too late. 

You can still build a substantial retirement fund by taking full advantage of available pension schemes, tax relief, and smart investment strategies. The road to a secure retirement may be shorter, but with the right approach, it’s within your reach.

Let Unbiased match you with a professional financial adviser who can guide you through starting a pension at 50 and help you create a tailored plan for a secure retirement.