Martin Lewis reveals the ‘scary rule’ for how much you should be saving in to your pension – and it’s more than you think
Martin Lewis has revealed the ‘scary’ rule that will help maximise pension savings.
The financial expert, 52, shared the handy ‘rule of thumb’ in his latest newsletter – providing a quick formula people can use to configure how much they should be saving.
Those wanting to know how much they need to be squirreling away need to ‘take the age when they start putting money in their pension, halve it, and that’s the percentage of their salary to aim to put into their pension for the rest of their working life for a strong retirement income’.
‘So start at 20 and it’s 10 per cent,’ Martin suggested. ‘This includes employer’s contributions. At 40, it’s 20 per cent.’
While the figure may seem daunting, he reassured that most don’t ever manage to hit the goal – but that it’s still a good aim.
He added that it’s always better to start saving earlier rather than later – and advised anyone who has received a salary increase to bump up their pension contribution before they can get used to the extra income.
He continued on the theme of starting early – and revealed that even babies can start a pension.
Martin urged that anyone can do so, as long as they can reach the minimum allowance.
Martin Lewis, 52, has revealed his rule of thumb in his latest newsletter where he explained what people should be expecting to save with their pension
‘Almost anyone can save into a pension and get tax relief, even if they’ve little or no income,’ he explained.
‘The minimum allowance is £3,600/yr (meaning it only costs you £2,880). This means even a newborn baby can get a pension.’
But he cautioned any grandparents against starting down that route – and instead said it was more worthwhile to explore ISAs and other savings accounts first for better returns.
Martin’s advice comes after he issued an urgent plea to state pensioners in December.
He explained that those who were born before 1958 could claim a free £3,900 government payment.
The money saving expert urged state pensioners that they could be entitled to a £3,900 yearly boost from the Department for Work and Pensions (DWP) – though they must claim the cash themselves as it won’t arrive automatically.
The presenter advised savers to take their age, halve it and then and put that amount of any salary in to a pot
Martin said a whopping £1.7 billion is waiting to be claimed by 850,000 state pensioners, urging those born in or before 1958 – aged 66 or older – to apply.
To meet the criteria for the £3,900 payment, applicants must be single and have a total weekly income under £218 – though the ITV and BBC team said those receiving less than £235 could also get it.
There is also the chance that couples could be entitled. For those of pension age earning a weekly total under £333, the chances of checking in the cash are high.
Equally, couples who earn less £350 per week also have a good chance of being entitled to the money.
Though the cash won’t arrive automatically and must be claimed, according to the money saving website.
MSE warned: ‘It’s NOT automatic so you MUST claim – here’s how. You can apply via Gov.uk if you’ve already claimed your State Pension, otherwise phone the Pension Service on 0800 99 1234 (or the Northern Ireland Pension Centre on 0808 100 6165). You can backdate it for three months, so the quicker you check, the quicker you’ll benefit.’
