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When should I start saving into a pension?

Question: I’ve just started my first job out of university. When should I start saving into a pension?

Answer: When you’re just starting out on the career ladder the last thing you want to do is thinking about your pension. After all that’s years away and you’re unlikely to be flush with cash.

However, given that the sooner you start putting money in the bigger your pot will be, the temptation to start growing your pension as soon as possible can be a big one.

Reasons to start saving

A pension is the only investment where you’re employer is required by law to contribute. Typically this will match your own contributions, so whatever you put in your employer doubles (or more). That means if your employer offers a pension scheme that you don’t contribute to you’re effectively turning down free money.

What’s more, your pension pot should increase in value over time. A pension is invested so you can expect whatever money you put in now to grow significantly over time. So again, the sooner you start the more you should have.

Reasons to wait

Regardless of what you stand to gain from investing in a pension early though it isn’t something you should do blindly. If money is tight, or if you have outstanding debts, the cost of falling behind is likely to blow any extra pension earnings out of the water.

For instance, those paying back a student debt should not be paying into their pension. Even worse is if you are paying into your pension but find yourself drifting into your overdraft and that end of the month – and incurring charges. You would be better off saving your pension money to ensure you stay debt free.

So when do you start? Clearly the sooner the better, but it has to be when you are financially stable. A typical age to start your pension savings is around 30.

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