"I will start my pension when I earn more." "I need the money now." "Pensions are for old people." These are the most expensive sentences a 22-year-old can say. Starting your pension in your 20s vs. your 30s can mean the difference of £100,000+ by retirement — even on a modest salary.
The power of starting at 22 vs. 32
Assume a £30,000 salary, 5% employee contribution, 3% employer match, and 5% real investment growth:
- Starting at 22 (35 years to age 57): pot of approximately £310,000
- Starting at 32 (25 years to age 57): pot of approximately £175,000
That 10-year delay costs approximately £135,000 in retirement wealth. The total extra contributions from those 10 years? Only about £24,000 from you personally. The rest is compound growth and employer/tax relief contributions.
You are leaving free money on the table
If you opt out of your workplace pension, you lose:
- Employer contributions (typically 3–10% of salary) — this is part of your compensation package that you simply forfeit
- Tax relief — the government adds 20–45% on top of your contribution
- NI savings — salary sacrifice saves 8–13.8%
The "I can not afford it" myth
A 5% contribution from a £25,000 salary costs you approximately £75/month in take-home pay (not £104, because of tax relief and NI savings via salary sacrifice). But £104/month goes into your pension. You are effectively getting a 38% return on day one before any investment growth.
What about student loans?
Pension contributions via salary sacrifice reduce your income below the student loan threshold sooner. On a £30,000 salary, a 5% salary sacrifice contribution reduces your student loan repayment by approximately £11/month — partially offsetting the cost.
The minimum you should do
At absolute minimum: contribute enough to get the full employer match. If your employer matches up to 5%, contribute 5%. Anything less is giving up free money.
See the real cost to your take-home
Use the salary sacrifice calculator to see how a pension contribution affects your monthly pay. The real cost is always less than the headline contribution amount.