Is Your UK Pension on Track? An Adviser Answers Your Questions
Our Guest, Joshua Shepherd, a London based Independent Financial Adviser, answers your key pension questions. Learn about the State Pension, how much you need to retire, and your options if you're self-employed.
"Most UK adults have no idea how much pension they’ll need or whether they’re saving enough. Let’s fix that."
As a financial adviser, I see the same worry in people's eyes every day. Retirement feels like a huge, abstract concept, and the idea of saving "enough" can seem like an impossible mountain to climb. The result? Many of us simply put it off, hoping for the best.
But hope is not a financial strategy. Gaining clarity and confidence about your retirement is one of the most empowering steps you can take. The good news is that the principles are simple, and it’s never too late to make a positive change. Today, I'm going to answer the most common questions I get asked about pensions to give you a clear, simple roadmap.
Why is pension planning so important?
Pension planning is important for one simple reason: compound interest. It is the single most powerful force for wealth creation, and it needs one crucial ingredient - time.
The money you save into a pension isn't just sitting in a vault; it's invested in assets like shares and bonds, which have the potential to grow. Compounding is the process where your investment returns start to earn their own returns, creating a snowball effect. A pound you invest in your 20s or 30s is vastly more powerful than a pound you invest in your 50s because it has decades longer to grow and compound.
Without a pension plan, you risk reaching retirement with only the State Pension to rely on. While valuable, it is simply not enough for most people to live a comfortable and worry-free life. Proactive planning is the difference between a retirement of scraping by and a retirement of freedom.
What is the State Pension and who is eligible?
The State Pension is the foundation of retirement income for most people in the UK. It’s a regular payment from the government that you can claim once you reach State Pension age.
Who is eligible? You build your entitlement to the State Pension through your National Insurance (NI) record. You get "qualifying years" by paying NI contributions when you're working, or by receiving NI credits if you're unable to work (e.g., due to illness or caring for a child).
How much is it? For those reaching State Pension age now, the full new State Pension for the 2025/26 tax year is £230.25 per week (approximately £11,973 per year).
How many years do I need? To get the full amount, you typically need 35 qualifying years. You need at least 10 qualifying years to get any State Pension at all.
What is the State Pension age? This depends on your date of birth. It is currently 66 for both men and women, and is scheduled to rise to 67 between 2026 and 2028, with further increases planned.
Action Point: You can get a personalised forecast of how much State Pension you're on track to receive and when you'll get it by visiting the GOV.UK website. This is a crucial first step in any pension plan.
How do I calculate how much I need to retire at 60 or 65?
This is the "how long is a piece of string?" question, but we can use a reliable rule of thumb to get a very good estimate. It’s a three-step process:
Step 1: Define Your Target Annual Income First, decide what kind of lifestyle you want. Let's say you decide you need £35,000 per year to live comfortably in retirement (after tax).
Step 2: Account for Your State Pension Subtract the full State Pension from your target.
£35,000 (Your Target) - £11,973 (State Pension) = £23,027. This is the annual income you need to generate from your own pension pots.
Step 3: Use the "25x Rule" A common guideline is that you need a pension pot of approximately 25 times the annual income you need to draw from it.
£23,027 x 25 = £575,675. So, to generate just over £23,000 a year, you would need a private pension pot of roughly £575,000.
The Challenge of Retiring at 60: If you want to retire at 60, the calculation changes significantly. You would have a gap of around 7 years before your State Pension starts. This means for those first 7 years, your private pot would need to generate the entire £35,000 annual income. This requires a much larger pot and a more detailed plan, often involving using ISAs to "bridge the gap" until your State Pension kicks in.
If I’m self-employed, what are my pension options?
When you’re self-employed, you don’t have an employer to set up a pension for you, so the responsibility is all yours. The good news is that you have excellent, flexible options.
A Personal Pension: You can set one up with a wide range of providers. Many modern digital providers like PensionBee or Penfold are great for the self-employed as they offer simple managed funds and allow for flexible contributions – you can pay in more when business is good and less when it's quiet.
A SIPP (Self-Invested Personal Pension): This is for those who want more control. A SIPP allows you to choose your own investments from a huge range of funds, shares, and ETFs. Providers like Vanguard, AJ Bell, and Interactive Investor are popular choices.
A Lifetime ISA (LISA): If you are under 40, a LISA can be a good option. You can save up to £4,000 a year and the government adds a 25% bonus. The money can be used for a first home or for retirement from age 60. The 25% bonus is equivalent to the basic-rate tax relief on a pension, but the withdrawals in retirement are completely tax-free.
For all these options, you get valuable tax relief from the government. For every £80 you contribute to a personal pension or SIPP, HMRC automatically adds £20, instantly turning your contribution into £100.
Know Where You Stand: Take the Plouta Financial Wellness Survey
Taking our Financial Wellness Survey is a great first step. It will help you reflect on your habits and identify the key areas to focus on in your journey towards financial freedom.
What is a workplace pension and how do employees enrol?
A workplace pension is a pension scheme arranged by your employer. Thanks to automatic enrolment, it has become the primary savings vehicle for most UK employees.
How it works: If you are an eligible employee (aged between 22 and State Pension age, and earning over £10,000 a year), your employer is legally required to automatically enrol you into their chosen pension scheme.
Contributions: The real power of a workplace pension comes from the "triple contribution":
You contribute a percentage of your salary (the legal minimum is 5% of your 'qualifying earnings').
Your employer contributes (a minimum of 3%). This is essentially free money – a key part of your pay package.
You get tax relief from the government on your contribution.
Opting Out: You have the option to opt out, but in almost all cases, this is a major financial mistake as you would be turning down the free money from your employer.
For employees, the process is simple: you don't need to do anything to enrol. It happens automatically. Your main actions are to check who your provider is, consider increasing your contributions if you can, and make sure you know how to log in to your online account to track your pot.
From Awareness to Action
Understanding your pension doesn't have to be complicated. As we've discussed, the path to a secure retirement is built on a few core pillars: making the most of your State Pension, harnessing the power of compounding in your private pensions, and having a clear target to aim for. The numbers might seem large, but they are achievable with a clear plan and consistent action.
The most important takeaway is to move from awareness to action. Check your State Pension forecast, track down those old workplace pots, and use a pension calculator to see where you stand today. These steps will give you a powerful overview, but a generic plan can only take you so far. Your goals, your career, and your family situation are unique, and your financial plan should be too.
If you're ready to create a clear, personalised roadmap to the retirement you deserve, we are here to help.
Book a complimentary, no-obligation call with me, Joshua, to discuss your personal situation and build a strategy that gives you confidence and control.
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Disclaimer: This article provides general information and is for informational and educational purposes only. It does not constitute financial advice. The suitability of any pension product or savings strategy depends on your individual circumstances and goals. The value of investments can go down as well as up. Always seek professional, regulated financial advice tailored to your specific situation.
