The comments come amid renewed concern over retirement savings in the UK. According to a recent Department for Work and Pensions report, millions of working-age adults are either under-saving or not contributing to a pension at all, despite many being employed.
Martin Lewis discussed the issue during a pensions-focused edition of The Martin Lewis Money Show Live and later in the MoneySavingExpert newsletter. His advice centred on a simple rule intended to help people estimate how much of their salary should go into pension savings each year.
Martin Lewis Explains the ‘Half Your Age’ Pension Formula
According to Martin Lewis, people should take the age at which they first start paying into a pension and halve it. The resulting figure represents the percentage of salary they should aim to contribute throughout the rest of their working life for what he described as a “decent” or “strong” retirement income.
Using the example given on the programme, someone beginning pension contributions at the age of 30 would aim to save 15% of their salary. A person starting at 40 would need to contribute 20%. Speaking on ITV1, Lewis described it as “the rule of thumb that scares the pants off everybody”, while also stressing that very few people actually manage to reach those contribution levels.
According to the MoneySavingExpert newsletter, the formula includes both employee and employer pension contributions combined. Lewis also noted that the principle behind the rule is to demonstrate the advantage of starting earlier, as pension savings have more time to benefit from compound growth.
Metro reported that Lewis described the guideline as a “very rough rule of thumb”, adding that “most people unfortunately won’t get there”. He encouraged savers to begin with whatever they can afford if the suggested percentages are unrealistic at first. Lewis also advised workers to consider increasing pension payments when they receive a pay rise, before becoming accustomed to higher monthly income.
Concerns Grow Over Pension Savings Across the UK
The discussion around pension contributions follows warnings from the Department for Work and Pensions about the number of people failing to save adequately for retirement. According to the DWP report cited across several publications, around 18 million working-age adults are not currently saving into a pension. The report also stated that nearly half of those people are in employment.
Pensions commissioner Baroness Jeannie Drake said recent reforms had improved pension participation over the past two decades, though concerns remain about future retirement incomes. She said many people are still “not saving enough and millions not saving at all”.
Lewis also addressed the State Pension during the television segment, explaining that entitlement depends on National Insurance contributions. According to figures referenced during the programme, individuals generally need 35 qualifying years to receive the full new State Pension. He added that at least 10 years of National Insurance contributions are required before any State Pension can be claimed.
Lewis also discussed the value of voluntary National Insurance contributions for some people approaching retirement age. He stated that an additional qualifying year could increase annual State Pension payments by roughly £360, based on the figures discussed during the programme.
