Money saving expert Martin Lewis has issued an urgent pension warning to Britons ahead of the looming changes to the retirement system that could impact households in 2025.
Specifically, the host of The Martin Lewis Money Show Live, the critical importance of starting pension savings as early as possible. Speaking on ITV’s This Morning, he emphasised that timing is crucial when it comes to pension planning.
“The earlier you start, the better, because the more time your money has to grow,” Lewis told viewers.
Writing on his website, Money Saving Expert, he reinforced his message, stating that “the basic advice with pensions is to put in as much as possible as early as possible”.
This warning comes as Lewis continues to stress the significance of early pension planning, with the expert noting on his podcast that while “it’s never too late”, beginning pension contributions at a younger age offers significant advantages.
Lewis shared a straightforward formula for calculating recommended pension contributions during his television appearance.
“Take the age you start a pension and half it. Then aim to put this percentage into your pre-tax salary into your pension each year until you retire,” he explained.
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To demonstrate his method, Lewis used his interviewer ITV presenter Cat Deeley, 48, as an example. “Say if you are 32, what’s half of that, 16. So you should be putting 16 per cent into your pension,” he explained.
This practical approach aims to provide viewers with a clear target for their pension savings, though Lewis acknowledges it may not be achievable for everyone. “However, hardly anyone can do this. So, the earlier you start it the better,” he noted during his ITV appearance.
Major financial changes that will impact pensioners are coming in 2025. Notably, the rates paid by state pension and Pension Credit are being raised thanks to the triple lock pledge.
Furthermore, Britons are being urged to make any necessary National Insurance (NI) contributions before the April 2025 deadline to ensure they get the full pension entitlement. Workers need 35 years of NI contributions to access the full, new state pension.
On top of this, the first pension providers will start connecting to the pensions dashboard from April 30, 2025.
All pension schemes must complete their connection to the system by October 31, 2026.
Operated through the Money and Pensions Service, people will be able to view all their pension pots in one centralised location.
Pension expert Helen Morrissey has highlighted the significant impact of tracking down lost pensions on retirement savings.
The head of retirement analysis at Hargreaves Lansdown notes that locating missing pensions could add thousands to retirement funds.
“Tracking down lost pensions could add thousands to your retirement pot while consolidating pensions can give you a whole new perspective on what you have,” Morrissey explained.
The scale of this issue is substantial, with the Pensions Policy Institute estimating there are nearly 3.3 million lost pensions worth £31.1billion in the system.
Morrissey advises making a comprehensive list of previous employers and checking pension paperwork for each.
For those unable to locate their pension documentation, the Government’s Pension Tracing Service can help by providing contact details for pension providers.
“Taking some time to get everything in order can help you look to the future knowing that you’ve got the most from your retirement planning,” she added.
Morrissey also emphasises the importance of pension consolidation, though with careful consideration of potential costs.
She advises checking for exit fees or guaranteed annuity rates before combining pensions into a single plan.
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Understanding state pension entitlement is crucial, with a full new State Pension currently worth over £11,500 per year.
“Taking the time to check your state pension entitlement can give you the confidence of knowing what you are getting from the state – and if there are gaps you have the time to fill them,” Morrissey explained.
As mentioned, in order to qualify for the state pension, those approaching retirement typically need 10 years of National Insurance credits, with 35 years required for the full amount.
Anyone who has gaps in their National Insurance record, due to leaving the workforce for a period of time, have until April 6, 2025, to address historical gaps dating back to 2006.
However, Morrissey reminded Britons to consult the Future Pension Centre before making any voluntary contributions to ensure they will result in increased pension benefits.
