How to save for retirement in your 20s and 30s
Discover how to save for retirement in your 20s and 30s. Learn about the power of compounding, maximising workplace pensions and budgeting tips to secure your financial future.
Your 20s and 30s are packed with challenges—student loans, rent, travel plans and just living your best life. With so much going on, saving for retirement can feel like something to worry about “later”. But even small steps now can make a massive difference for your future self. The earlier you start, the easier it is, and you’ll thank yourself down the line.
Start early – let your money work for you
Think of saving for retirement like rolling a snowball down a hill. At first, it’s tiny, but as it rolls, it grows—fast. This is because of the power of compounding—when you earn returns on the money you invest as well as on the returns themselves. Even small monthly contributions can snowball into a significant sum over time.
For example, our calculations show that if you start saving £100 a month at age 25 and earn an average annual return of 5% after fees, you could have nearly £150,000 by age 65. But if you wait until age 35 to start, you’d have just over £80,000. That’s a £70,000 difference all because you waited 10 extra years to get started!
Make the most of your workplace pension
One of the best ways to kickstart your retirement savings is by maximising your workplace pension. Many employers will match or even exceed your contributions up to a certain percentage of your salary.
For example, with auto-enrolment, many employers pay in 3% of your salary and you pay in 5%1, but if you bump your contribution to, say, 7% they might also pay in 7%. On a salary of £50,000, this could result in an extra £3,000 a year going into your pension.
You can find out what your employer offers by asking your HR department.
Self-employed or want more control? Try a SIPP
If you’re freelancing, side hustling or your employer’s pension isn’t enough, a self-invested personal pension (SIPP) gives you flexibility and control. You can choose your own investments or, if you opt for our Managed Personal Pension, we’ll select funds for you. You can stash away bonuses, tax refunds or gifts for extra growth.
Plus, the government tops up your contributions with tax relief. For every £80 you pay in, you get £20 added. If you’re a higher-rate or additional-rate taxpayer, you can claim an extra £20 or £25, respectively, through your tax return or HMRC’s online service.
If you run your own business as a limited company director, there are other perks you might not know about. If you make pension contributions from your business account, they’ll be treated as an ‘allowable business expense’, which could reduce your corporation tax bill2. What’s more, employers don’t pay national insurance (NI) on pension contributions, so by contributing directly into your pension (rather than taking the money as salary) you could save a chunk of money that would otherwise go to the taxman.
A SIPP is also handy if you want to combine old pensions from previous jobs. Keeping everything in one place cuts down on admin and makes it easier to track your progress.
Budgeting and saving tips for busy lives
Saving for retirement doesn’t have to be overwhelming. Here are a few tips to make things easier:
Automate it
Set up a direct debit so your SIPP gets funded every month without you having to think about it. You might not even notice the money leaving your account, but it’ll be working hard for your future.
Start small
Even a small amount each month can make a big difference over time. As your income grows, you can gradually increase your contributions.
Cut back on extras
Take a look at your monthly expenses and see where you can cut back. Maybe you can cook at home more often, ditch unused subscriptions or switch to a cheaper broadband deal. Every pound saved can boost your pension.
Consider a side hustle
Got a skill or hobby? Consider turning it into a side hustle and put those extra earnings towards your future.
The bottom line
Retirement might seem ages away, but the choices you make now can have a huge impact. Every little bit counts, and starting today is the best move you can make for your future self.
Want more tips? Check out our “Couch to a £500k pension” hub for a step-by-step plan.
1 The auto-enrolment minimum contribution for the tax year 2025-26 is 8% of your salary between £6,420 and £50,270. The 8% comprises 5% from you (including tax relief) and 3% from your employer.
2 For a company pension contribution to be an allowable business expense, it must pass the ‘wholly and exclusively’ test. This means that HM Revenue & Customs (HMRC) must deem the contribution to be wholly and exclusively for the employer’s trade or profession. HMRC may want to establish whether your total remuneration, including pension contributions, is reasonable for the work being done.
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The value of investments, and the income from them, may fall or rise and investors may get back less than they invested.
Eligibility to invest in a Vanguard Personal Pension depends on your individual circumstances. Please be aware that pension and tax rules may change in the future and the value of investments can go down as well as up, so you might get back less than you invested. You cannot usually access your pension savings or make any withdrawals until the age of 55, rising to the age of 57 in 2028.
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Any tax reliefs referred to are those available under current legislation, which may change, and their availability and value will depend on your individual circumstances. If you have questions relating to your specific tax situation, please contact your tax adviser.
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Vanguard only gives information on products and services and does not give investment advice based on individual circumstances. If you have any questions related to your investment decision or the suitability or appropriateness for you of the product(s) described, please contact your financial adviser.
This is designed for use by, and is directed only at persons resident in the UK.
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