How to boost your pension in your 20s and 30s, according to a millennial money coach

Mystified by your pension? We asked a millennial money expert to explain how you can get the most out of your future savings. 

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Dealing with your pension might feel like a long way off, but thinking about the money you have squirrelled away for the future is extremely important, especially for women.

Why? Because according to a report from pensions company Scottish Widows, the average woman in her 20s today can expect to have £100,000 less in her pension pot than a man of the same age when she retires. Furthermore, the report found that this gender pension gap comes not just as a result of women earning less and taking time out of paid employment, but is also due to a lack of financial engagement among young women. 

In fact, further research from Profile Pensions discovered that a third of millennials are not saving for their future and that many people aged 23 to 38 felt uninformed when it came to pensions. 

“I spend a lot of time thinking about how to make pensions more appealing,” says Ellie Austin-Williams, a millennial money coach and founder of This Girl Talks Money. “The most pressing reason people should care is that we’re now living well into our 80s and, on average, women are living longer than men. That means we’ll have over a decade of life to fund without an income if we’re not working. If you’re not putting money away into a pension, then how are you going to pay for it?”

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“It can sound scary and depressing, but the reality is that the landscape for retirement has changed dramatically since our grandparents retired,” Ellie continues. “The government will not be supporting us in the same way and the type of pensions people get nowadays are much less beneficial than they were 20 or 30 years ago.” 

With this in mind, it’s more important than ever to start thinking about our future finances, and it’s easier than you might think to get started: “There are loads of systems already set up in banking to make it easy to do things, but people just don’t know about them,” says Ellie. So, we asked her to share her best advice for boosting your pension pot in your 20s and 30s.  

Ellie’s advice for boosting your pension in your 20s and 30s 

Pay as much as you can into your workplace pension

“If you’re employed, a workplace pension is always a good starting point,” says Ellie.

From 2018 it became compulsory for all employers to automatically enrol employees who are over 22 and earning over £10,000 into an automatic enrolment pension scheme. These pensions are essentially long-term saving accounts where you receive tax benefits from the government and your employer pays money in too. In a sense, it’s a way to get free money

By law, 8% of your salary should be going into your pension pot as an absolute minimum. 

“Your employer will normally match what you contribute up to a certain point,” says Ellie. “That means the more you put in, the more they put in – so it’s an incentive for you to make bigger payments to get more from them. It really is worth paying the maximum because you’re basically getting free money out of your employer.”

The contributions you make to your pension come out of your pre-tax salary, so there’s also a tax benefit to stumping up some extra cash for your pension each month. “It’s a very tax-efficient way to invest money for your future,” explains Ellie.

“You can really boost your pension pot from a young age if you maximise your contributions and have a generous employer that will match them,” says Ellie. “Then you can start backing up your pension really well, quite early.”

Change your pension risk level

A lot of employees don’t know that they can find out more information about their pension and make changes to their scheme by going directly to their pension provider. One change that’s worth investigating is altering the risk of your pension. “This can make a huge difference to your pension pot,” says Ellie. 

“Most workplace pension schemes will go into a medium risk fund,” she explains. “This means it will have very average returns.”

“However, when you’re in your 20s, 30s and 40s, you can afford to take a bit more risk with your investments because you’re not able to access your pension until you’re 55,” says Ellie. 

Ellie advises asking your pension provider to put your scheme into a higher risk investment, which will normally grow your pension quicker. There are some caveats and growth isn’t guaranteed, but generally, this should help you maximise your money

You can always change your risk at any point. “Most pension schemes are automatically set up to reduce the risk five or 10 years before you hit pensionable age,” says Ellie. “You don’t really need to worry about it staying at a higher risk as it will change, or you can change it.” 

Consolidate your pension

The days of having one job for life are slowly declining, meaning most young people may find they have lots of different pension funds from various employers they’ve worked for.

Consolidating all your different pension pots into one scheme can remove the hassle of managing lots of different plans, give you a clearer idea of what you’ve got earmarked for retirement, could reduce fees and give you access to a wider range of investments. Ultimately, it could mean a higher pension income.

“You can consolidate pensions very simply,” says Ellie. “Speak to the provider you want it to be consolidated with – this will usually be your most up to date provider – and they should have the ability to pull them all into one place.”

The only thing to watch out for is whether there are penalties for withdrawing from any of your old schemes; however, this isn’t as common anymore. “Most millennials will have defined contribution schemes, which usually don’t have penalties,” says Ellie, “but just double check before you go ahead with consolidation.”  

Self-employed? Take advantage of tax relief  

Self-employed people don’t have the ease of a workplace pension, but they do qualify for the same tax relief. 

If you pay money into your own personal pension, you will automatically get 20% tax back from the government, this is an additional deposit into your pension pot. If you are a higher-rate taxpayer then it means you can claim an additional 20%. Top-rate taxpayers get to claim an additional 25%.

“There are lots of different providers that offer pension schemes for self-employed people,” says Ellie. “You can set them up through investment platforms, or specialist pension providers.” 

Normally, self-employed people will be set up with a self-invested personal pension or a SIPP. “This means you put money in, the provider will sort out the tax relief for you and give you an extra boost from the government,” says Ellie. “The only difference is that you don’t get the bonus of having the employer contribution. This means you’ll need to contribute more.”

Look out for fees when you’re setting up a personal pension, Ellie warns. “There will always be fees for a pension, as with any investment, such as a management fee, or an annual charge. There are also different ethical and various risk options.”

It’s important to note that tax rules may change in the future and their effects on you will depend on your individual circumstances.

Speak to a Financial Conduct Authority registered financial adviser before taking financial advice, and think carefully before making any decision.

Find more money management tips on Ellie’s website This Girl Talks Money. For more expert-led guides and tutorials follow The Curiosity Academy on Instagram (@thecuriosityacademy). 

  • Ellie Austin-Williams, millennial money coach and financial content creator

    Ellie Austin-Williams headshot
    Ellie Austin-Williams runs the financial platform This Girl Talks Money.

    Ellie qualified as a solicitor and worked at a private pensions company before founding This Girl Talks Money in 2019 out of frustration that the personal finance industry wasn’t engaging with 20 and 30-somethings. TGTM has grown into a fully-fledged online community with a mission to help millennial women feel confident and in control of their money without sacrificing their social lives.