How To Start Preparing For Retirement In Your Twenties

preparing for retirementWith the recent introduction of new government guidelines on pensions, there’s never been a better time to start looking at how to fund later life. The reform includes a new flat-rate state pension worth an estimated £144 per week in today’s money, to provide the UK’s elderly with ‘the minimum’ they will need.

If you’re in your 20s, you may feel too young to be thinking about retirement, particularly with the government’s plans to bring the state pension age to 66 by 2020 and 67 by 2028.

However, the reform has been established to put more responsibility on the individual to make adequate preparations for later life by making only basic funds available on the state pension. Therefore, it’s a good idea to start thinking about what savings to make as early on as possible…

Key points for your 20s:

  • Clear your debts
  • Check out your company pension plan
  • Open an ISA

Clear Debts

You’ve probably got yourself your first proper job in your twenties, having possibly been to university or traveling since college. So, first thing’s first: you need to get straight.

Depending on if and when you went to University, you can probably expect to have a student loan, and the reality for many is that there is some unpaid debt on credit cards and loans.

It’s easy just to keep paying off the minimum every month, when you do this, you’re just covering interest and the monthly payments are doing nothing to reduce your debt.

Formulate a plan to pay off expensive, unsecured debt as a priority. A good way to do this is set up a direct debit to take a certain amount from your account on payday, so you don’t see it and have no opportunity to spend it!

Company Pension Plan

As of October 2012, the vast majority of the UK’s employers are now legally obligated to enroll all of their employees (aged 22 and over) into a pension scheme.

This has to be the easiest and more lucrative way of accruing resources for retirement – it essentially acts as a pay rise. When you contribute to your company pension, your employer will also make contributions on your behalf based on the percentage of your salary that you commit each month.

It’s never too early to start, and because it’s taken out of your wage before you get a chance to see it, you won’t have a chance to miss it!


If you feel like you do have some disposable income to squirrel away, then one of the best places for young people to grow their savings is a tax-free ISA.

Choose an ISA where you are still building financial resources for the future, but maintain flexibility in terms of accessing money just in case you find yourself in need of it, for example, when you invest in property.

Retirement may seem like a long way off, but the earlier you start building a nest-egg, the easier you will make saving during your thirties, forties, fifties and even sixties.

This article was contributed by Laura Moulden on behalf of Cheselden; specialists in continuing healthcare funding.

 Photo by frizzychick
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  1. Definitely prepare early! Every little bit helps.

  2. Definitely a relevant post for so many. Clear insight in a great post. Thanks for this.

  3. I love the point about clearing debts early on. If I had anything to do over again it would be to reduce my debt at a young age. What an anchor that was…..

  4. Good tips for when you’re new to the process. Another major thing to do in your 20’s: Educate yourself on the options for tax deferred savings. Start making a plan and mapping out how you can achieve the retirement you want to experience by the age you want to stop working. Then commit yourself to actually making it happen!

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