When it comes to starting saving into a pension, the best advice you can get is that it’s never too early to get started. 

For many people it’s much more important to live here and now and be able to afford vacations, cars, and other nice things while they’re young. The idea of putting a portion of their money for decades only to be able to see some benefits when they retire doesn’t seem very appealing. 

However, the thing is that if you delay your pension saving for too long, you risk losing thousands of pounds every year. 

Here’s why you should start planning your retirement income right away and make sure that you don’t run out of money once you stop working. 

Life Expectancy Has Increased 

And this trend is expected to continue.

Global average life expectancy went up by 5.5 years between 2000 and 2016, and that means people in the European region on average live 77.5 years. In the UK, life expectancy at birth between 2016 and 2018 was 79.3 for males and 82.9 for females. 

While this is good news, it still brings about some issues regarding whether you’ll be able to save enough for your retirement years. 

Given that the state pension age will reach 66 by 2020 in the UK, you can do the math and conclude that the average man will spend 13 and the average woman almost 17 years in retirement. 

So, you’d better start building your nest egg for your old age as soon as possible. 

Your State Pension Won’t Be Enough 

If you’re relying on your state pension, then you should know that at the moment it amounts to £168.60 per week or less than £8,500 a year. 

In other words, unless you opt for a workplace or individual pension, you can expect that your standard of living will plunge once you retire. 

Besides that, the already mentioned state pension age is expected to be pushed back in the future, which means that you’ll have to work longer than if you had a private pension in which case you’d be able to retire at the age of 55. 

So, it’s obvious that by making a small financial sacrifice early on will allow you both to stop working while you’re still relatively young and have more money at your disposal. 

The Earlier You Start, the Less You’ll Have to Tighten Your Belt 

There’s a formula for determining how much you should save, and according to it, you should take half the age you start saving into a pension and save that percentage of your pre-tax income on an annual basis until you retire. 

In other words, if you start with this plan when you’re 20, then you should put 10% of your pre-tax income into your retirement fund. 

It’s significantly less than having to put aside 20% of your income, which would be the case if you started saving when you’re 40. 

Apart from that, you shouldn’t forget that we’re all creatures of habit and that if we keep on spending our entire salary for 10 years, it will be very hard to adjust to having less disposable income and come to terms with the idea of cutting our expenses. 

So, if you want to reduce the financial burden of saving for your pension, start as early as you can. 

Saving Money Into a Pension Will Lower Your Taxes

People who save money into a pension fund receive tax relief on their contributions. 

In other words, you get back the money you pay as the tax on your contributions, and this amount is transferred to your pension pot. 

For basic taxpayers, this tax relief is 20%, while the advanced ones get 40%, and those who are additional taxpayers can expect to receive 45%.

In practice, this means that if you’re a basic taxpayer, in order to save £100 into your pension, you will have to give £80 as the rest will be covered by the government. 

Again, the earlier you start saving into a pension, the more money will you get as the result of this tax relief, and over the years this amount can reach thousands of pounds. 

You’ll Be Eligible for a PCLS

The Pension Commencement Lump Sum refers to a tax-free lump sum that you can take from your pension pot once you retire. This lump sum can be up to 25% of your pension capital, and you can spend it the way you like – on a trip around the world or for paying off your mortgage. 

This will leave you with 75% of your pension pot, but it’s still a good idea to plan your PCLS and make sure that you’ll have enough money for the rest of your retirement days. 

As you can see, being financially disciplined and starting your pension early can help you enjoy your retirement and not having to worry about the money when you stop working.