Pensions feel distant and dull in your 20s — which is precisely when they are most powerful. The same pound contributed at 25 is worth roughly four times one contributed at 55, purely through compounding time.
Auto-Enrolment: The Floor, Not the Target
The legal minimum is 8% of qualifying earnings (5% you, 3% employer). Convenient, but on a median salary it builds a distinctly modest retirement. Treat 8% as the starting line.
The Free Money Hierarchy
- Employer matching first: many employers match above the minimum — 5% for 5%, sometimes more. Not maximising a match is refusing a pay rise.
- Tax relief: a £100 pension contribution costs a basic-rate taxpayer £80 and a higher-rate taxpayer £60. Salary-sacrifice schemes save NI too, cutting the real cost further.
The Half-Your-Age Rule
Old adviser heuristic: start contributing (total, including employer) a percentage equal to half your age when you begin. Start at 24 → 12% for life. Start at 40 → 20%. Brutal, but it captures the cost of delay honestly.
What £200/Month Becomes
At 7% average growth: from age 25, ~£480,000 by 65. From 35, ~£226,000. From 45, ~£98,000. The decade you start matters more than any fund choice you will ever make — and with tax relief, £200 in the pot can cost you as little as £120 take-home.