Martin Lewis explains simple pension savings formula to check if you have a 'strong fund'
The money-saving expert and his podcast guests shared a simple equation that can help people work out if they are saving enough for their retirement, regardless of how old they are
Martin Lewis has revealed a simple equation that can help Britons assess if they're on track with their retirement savings, regardless of their age.
The Money Saving Expert detailed an equation using a person's age to determine whether the contributions they're making to their pension are sufficient for a robust retirement fund.
On his Not the Martin Lewis podcast, he prefaced the explanation with a disclaimer: "Do not panic. It's this old equation, it's not particularly accurate...it's just a way of indicating to you that earlier is better."
Using his guest, Tideway wealth manager Mihir Choughule, as an example, Martin explained: "You take your age when you start putting in your pension and you half it," which for 30-year-old Mihir, equated to 15.
He elaborated: "So the equation says you want to put 15% of your income, that includes employer contribution, into your pension for the rest of your life to have a pretty strong retirement fund."
Concerned he may have alarmed some listeners, the MSE founder emphasised: "Very very few people manage that...Nobody do that equation and go; 'Oh my god I'm never going to do anything! '".
"The real lesson from that is the earlier you start the better because the more time your money has to grow when it's in your pension."
Martin Lewis, the Money Saving Expert, has highlighted the importance of including employer contributions when calculating personal pension savings.
On his podcast, he was joined by Charlotte Jackson from the Money and Pension Service, who emphasised the benefits of workplace pensions as a starting point for retirement planning.
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Charlotte stressed the advantages of staying enrolled in a workplace pension scheme: "]Under automatic enrollment the employer is required to put you into a pension, you can decide to opt out, but you will get benefits from your employer paying in and you will get tax relief on anything you save in there. It's a really really good deal."
Martin went on to clarify the financial benefits of such schemes: "]Let's imagine you are putting in £100 a month of your income as a basic minimum, your employer would need to add £60 on top. You're putting in £100, you're getting £160 in your pension."
"Yes, the money's wrapped away but as a form of saving the tax benefit plus the employer contribution is unbeatable. If you're not opted in, you can say to your employer 'I want to opt in' and they must allow you to opt in and they must contribute to your pension."