Martin Lewis shares exactly how much you should be saving in your pension - but most 'won't get there' Getty/ metro
‘Take a deep breath,’ urged Martin (Picture: Getty/Metro)

Think you’re saving enough for your future? Probably not, according to a pensions rule of thumb shared by Martin Lewis.

In the latest edition of his newsletter, the Money Saving Expert (MSE) founder focused on pensions, with guidance on everything from finding lost savings to maximising your investment.

Among this advice, he also looked into how much we should be setting aside for retirement — and it’s certainly sobering.

‘Take a deep breath,’ urged Martin, before revealing a ‘scary,, old, famous, very rough rule of thumb’ to work out your route to a decent pension savings pot.

He explained: ‘Take the age when you start putting money in your pension, halve it, and that’s the percentage of your salary to aim to put into your pension for the rest of your working life for a strong retirement income.

‘So start at 20 and it’s 10% (this includes employer’s contributions); at 40 it’s 20%.’

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If we drill that down, it means a 40-year-old on the average UK salary for their age (£40,040) is supposed to invest £8,008 into their pension this year alone. The figure for a 20-year-old on the average wage of £22,932 is £2,293.20.

Bear in mind, exact amounts will increase or decrease along with how much you earn, and your personal contribution will differ depending on how much your employer puts in.

However, Martin’s formula is a great way to get your retirement plan started, offering a useful — if stark — insight into the consequences of burying your head in the sand.

‘Most people unfortunately won’t get there.’ Martin added. ‘Yet the real message to take is that the earlier you start, the better, as you’ve longer for gains to compound.’

Overhead view of young Asian woman managing personal banking and finance at home. Planning budget and calculating expenses while checking her bills with calculator. Managing taxes and financial bills. Home budgeting. Concept of finance and economy
The earlier you start, the less you’ll have to put aside each month (Picture: Getty Images)

The MSE website affirms this, noting that ‘most people are unable to contribute enough at the beginning for the “half your age” rule,’ so you should ‘start with whatever you can.’

It’s also advised to earmark a set proportion (rather than a set monetary amount) each month, meaning you won’t start to fall behind as your earnings go up.

And Martin offered an additional tip for newsletter readers too: ‘Every time you get a pay rise, if possible, put a chunk of that into your pension before you get used to the increase.’

Lifestyle creep (sometimes known as lifestyle inflation) is a real thing, so getting in ahead of it is a nifty way to trick yourself into being responsible.

Spending in the here and now is often necessary, but just think how happy ‘future you’ will be if you look out for them too.

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