Martin Lewis explains pension ‘rule’ for ‘better retirement’ | UK | News
Martin Lewis shares ‘rule of thumb’ on ITV show (Image: ITV)
Martin Lewis has shared a ‘rule of thumb’ which he says should help people achieve a ‘better retirement’. The founder of Money Saving Expert revealed this on the latest episode of ITV’s The Martin Lewis Money Show, which aired last night (May 5).
The financial expert hosted the “Retirement Special” episode, which he described as the “most important show” of the year. During installments he talked about personal and business pensions, the ‘superpowers’ of retirement, inheritance tax and how to find lost pensions.
He also answered questions from the audience. Martin Lewis’ co-host Jeanette Kwakye MBE read a question from a viewer named Daryl asking how much he should contribute to his pension.
He said: “Daryl asks: While I want to put more money into my pension, I don’t want it to affect my current quality of life. Is there a good rule of thumb for paying into a pension? Is paying 15% contribution enough for someone in my mid-thirties?”
In response, Martin Lewis said: “Wow, I think you’re doing really well. I mean, a lot more than most people. Let me give you the rule of thumb that scares everyone.”
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He went on to share the ‘rule of thumb’ for a ‘better retirement’. It involves taking your age when you start retirement and dividing it by two. This result is the percentage of earnings you should try to save for the rest of your working life (for example, if you start at age 20, save 10%; if you start at age 40, save 20%).
He explained: “Take the age at which you start investing for your retirement. So in your case we’ll say 30. Half of it, which is 15. That’s how much of your income you want spent on a good retirement for the rest of your life.”
Martin Lewis emphasized that many people do not achieve this goal in real life, but starting earlier provides better retirement outcomes. “Very few people can get there,” he said.
Martin Lewis then pointed out that starting to save for a pension earlier will help you have a more secure financial situation when you retire. “The main reason to use this rule of thumb is to point out that the earlier you start, the better retirement you will have,” he said.
Martin Lewis also pointed out that receiving a state pension depends on the National Insurance contributions people make while they are working. This is different from any private pension plan they may have.
He added: “Of course, depending on your National Insurance contributions and when you retire at 66 or 67 you’ll also get the state pension, but tonight we’re focused on private pensions.”
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In the UK, anyone who earns National Insurance years through work can get a State Pension (you can also earn National Insurance years in other ways, such as looking after your child, being a carer or being sick). Most people today need around 35 years to qualify for the new State Pension, which is currently £241.30 per week for a single person.
About Money Saving Expert websiteIt says: “This payment is taxed like other income and is paid out when you reach a certain age, whether or not you are currently working. Between 2026 and 2028, this age is being gradually increased from 66 to 67, so if you are currently 65 or 66, the exact date you will qualify will be determined by your date of birth.” You can use the government’s facilities State Pension age tool to check.
