Finance expert Damien Fahy, founder of Money to the Masses, has revealed that starting a Self-Invested Personal Pension (SIPP) at age 50 is not too late. Many Brits rely on workplace pensions, but a 2021 Sun Life report found that 25% of those surveyed had no private pension. For those without a workplace pension, or even those who have one, a SIPP can be an effective retirement savings vehicle.
Starting a SIPP at 50: Still Time to Build a Pot
Fahy told the Daily Express: "It is certainly not too late to start a SIPP at 50. Someone retiring at 67 still has 17 years to contribute and potentially benefit from investment growth, although starting later will generally mean contributing more." A SIPP allows contributions of up to £60,000 per year, with 20% tax relief, meaning for every 80p paid in, the government tops it up to £1. Access to a SIPP is currently possible from age 55, but this will rise to 57 from April 6, 2028.
How a SIPP Works and Who It Suits
A SIPP lets savers choose their own investments or have them managed professionally by an investment platform. Most experts agree it is best for those comfortable with research and investing. Investments can go up or down, and money is protected if the provider goes bust. SIPPs can also be inherited by loved ones.
For self-employed individuals who lack employer pension contributions, a SIPP can be an effective way to build retirement savings and benefit from tax relief. Fahy added: "Limited-company directors may be able to boost their pension faster by making employer contributions directly from the company, which can also reduce taxable profits where the contribution qualifies as a business expense."
Impact of Fees and Charges
The final pension pot at age 67 depends not only on contributions but also on keeping costs low. For example, investing £1,000 monthly over 17 years, reducing total annual fund and platform charges from 1.5% to 0.5% could leave you around £27,000 better off, assuming a 5% return before charges. Fahy stressed: "That's why it’s important to shop around for the cheapest SIPP and keep the underlying investment costs low."
Money Saving Expert's top DIY SIPP providers include AJ Bell, Fidelity, Interactive Investor, Hargreaves Lansdown, and InvestEngine. Professionally-managed platforms include AJ Bell, Interactive Investor, and Vanguard. Fees range from 0% to 0.45%.
Retirement Income Targets
According to the Pensions and Lifetime Savings Association (PLSA) standards, a single person needs £32,700 a year after tax for a moderate retirement, assuming no mortgage or rent. After accounting for the full state pension, a private pension pot of roughly £335,000 to £505,000 may be required, based on typical annuity income levels.
Fahy noted that how you build your pension pot depends partly on employment status. Employees should contribute enough to receive the maximum employer match, as not doing so is effectively turning down free money. He concluded: "So if you are 50 with no pension pot, the best time to start saving for retirement was yesterday. The second-best time is today."
