Martin Lewis has revealed a 'rule of thumb' that he claims can help people secure a 'better retirement'. The MoneySavingExpert founder outlined the advice during the latest episode of ITV's The Martin Lewis Money Show, broadcast on May 5.
Pensions Special Episode
The finance expert presented a 'Pensions Special' episode, which he described as his 'most important show' of the year. The programme covered private and workplace pensions, pension 'super powers', inheritance tax, and how to track down lost pensions. It also addressed viewer questions.
Co-host Jeanette Kwakye MBE read a question from viewer Daryl, who asked about a good rule of thumb for pension contributions. Daryl, in his mid-thirties, wanted to contribute more without affecting his current quality of life, specifically asking if 15% contributions were sufficient.
The Rule of Thumb
Martin Lewis replied: 'Wow, I think you're doing really well. I mean, way more than most people. Let me give you the rule of thumb that scares the pants off everybody.' He then explained the rule: take your age when you start your pension, halve it, and that figure is the percentage of your salary you should aim to save for the rest of your working life. For example, if you start at 20, save 10%; if at 40, save 20%.
Applying this to Daryl, who started at around 30, the target would be 15%. Lewis noted that very few people achieve this target, but starting earlier leads to better retirement outcomes. 'The real reason for using that rule of thumb is to indicate that the earlier you start, the better a retirement that you're going to have,' he said.
State Pension and National Insurance
Lewis also highlighted that eligibility for the state pension depends on National Insurance contributions, which are separate from private pensions. In the UK, most people need about 35 qualifying years to claim the full new State Pension, currently £241.30 per week for a single person. The state pension age is gradually increasing from 66 to 67 between 2026 and 2028.
The MoneySavingExpert website advises: 'This payment is taxed as other income is and currently paid when you hit a certain age whether you still work or not.' To check your state pension age, you can use the government's online tool.
A pension is a tax-efficient way to save for retirement, typically including your contributions, employer contributions, and government tax relief. Starting early allows you to benefit from compound growth and maximise employer contributions.
