The pension lie we tell ourselves

There’s a lie many of us tell ourselves about pensions and we don’t want to admit, Sahar Nazir writes.

The lie is that when we think about pensions, we say “I’ll sort it out later”. But ‘later’ rarely comes.

Even if you believe it’ll somehow happen when you earn more, when your kids are older, or when the mortgage is smaller – “I’ll sort it out later” will have already become an expensive mistake.

The most valuable asset for your pension is your salary, as this is where contributions come from and taxes are saved. Gone are the days of ‘final salary’ (for those in the private sector) where the rewards outweigh the upfront contributions.

Instead, we have ‘defined contribution’ which – in essence – means we get out of our pensions what we put in, with some valuable tax relief and investment growth along the way.

Depending on your employer’s scheme, you’ll contribute a minimum percentage of your salary, typically of around 8% of your earnings before tax – once you factor in both your (5%) and your employer’s (3%) contribution.

But this minimum contribution isn’t designed to give you a comfortable retirement. Rather, it is there to get you started. For many of us, 8% will not produce an income in retirement that remotely matches the lifestyle we’d hope for.

This is especially true if starting later, taking career breaks, reducing hours, or dipping in and out of work – something which affects women disproportionately.

Another common assumption is that the State Pension will cover the basics. From April 2026 the full new State Pension will pay £12,548 per year. This falls nearly £1,000 short of what Pensions UK, the industry body, says one person needs for a ‘minimum’ comfortable retirement.

Those wanting to live a ‘moderate’ or ‘comfortable’ retirement would need £31,700 or £43,900 respectively. Ask yourself honestly: could you live on the minimum?

This needs to cover housing, food, energy, transport, the occasional holiday, gifts for grandchildren and the unexpected costs like a broken pipe in the home. For most of us, the answer is no.

According to the Real Living Wage Foundation (RLWF), more than half of those on a low pension income “struggle to keep up with basic bills or credit commitments”. It found that one in three (33%) depend on money from sources such as benefits or cash from friends, family or a partner to make ends meet.

Yet lots of people are either not contributing to a private pension at all or contributing the bare minimum and assuming it will somehow be fine. The Government said in July 2025 that nearly half (45%) of working age adults are saving nothing into a pension at all.

The RLWF also found over 80% of workers with a Defined Contribution (DC) pension are not saving enough each year to achieve what it calls a Living Pension pot.

30-year retirement

Retirement is expensive, but not because it’s extravagant. Many of us simply underestimate how long retirement lasts.

Some people will spend 20, 25 or even 30 years in retirement. This is a life stage in itself rather than just an epilogue to your life.

If you retire at 65 and live to 90, that’s 25 years without employment income.

If you want £25,000 a year in retirement income (before tax), you’re potentially looking at needing hundreds of thousands of pounds in pension savings, depending on how that money is invested and drawn down.

So against this minimum of 8% – how much of our monthly salary should we actually be trying to save?

Typically, financial advisers suggest that you should save 10-20% of your salary every month, according to Smart Pension.

Legal & General say that if you’re 30, pay 15% of your salary into your pension. If you’re 40, pay in 20% of it.

General guidance suggests that if you get a pay rise, then you should increase your pension contribution slightly. If you clear a debt, redirect some of that payment into your pension too.

Uncomfortable questions

Sometimes it’s important to ask or answer uncomfortable questions. When people say, “I can’t afford it” they likely mean “I don’t want to think about it.” This especially happens when retirement feels far away and there is no immediate reward.

But future you is not a different person, so the decisions you make (or avoid) will determine how much independence you have as the old version of yourself.

If you’re not paying into a pension, why not? If you are paying in, do you know how much? Do you know what it might give you? Have you ever increased it?

A recent Standard Life report suggested that just because people are worried about pension saving, it doesn’t mean they’re actively saving.

The firm’s 2025 Retirement Voice report found just over half (53%) of UK adults are expecting to work beyond the State Pension age, but only 15% have pension saving as one of their top financial priorities for the year.

To make matters worse, the future remains uncertain. Pensions are viewed as too complex by many. The report also found that 73% of Brits believe retirement in the future will be more “complex” than it is now. What’s more, just over half (51%) think the State Pension will still be available for all, as it is currently, by the time they retire.

It’s easy to read all of this and feel defensive. It’s no secret that the cost of living is high, rents across the UK are increasing and mortgages have jumped, so for some people there genuinely isn’t spare money. But for many others, there might be small opportunities hiding in plain sight.

Financial planners such as Clear Cut Chartered Financial Planners suggest ideas to help boost your pension fund including reviewing budgets; asking your employer to increase their contributions; claiming tax relief at your marginal rate each year; and consolidating your defined contribution schemes.

What next?

The Government revived the Pensions Commission in July 2025, examining why tomorrow’s pensioners are on track to be poorer than today’s.

It found that the 2006 commission was “a huge success” in building a consensus for the roll out of automatic enrolment into pension saving, which has led to 88% of eligible employees now saving, an increase of 55% from 2012.

However, it also found that retirees in 2050 are on course for £800 or 8% less private pension income than those retiring today. It said that two in five or nearly 15 million people are under-saving for retirement.

The Government said at the time of relaunch that the Commission will explore barriers stopping people from saving enough for retirement, with its final report due in 2027. This report will look into the pension system and examine what is required to build “a future-proof pensions system that is strong, fair and sustainable”.

Pensions minister Torsten Bell warned at the time that if we carry on as we are, “tomorrow’s retirees risk being poorer than today’s”.

We all know that we don’t need to wait until 2027 for a Commission to tell us what most of us already know deep down…that we are not saving enough.

If tomorrow’s retirees really are on track to be poorer than today’s, then “I’ll sort it later” is the real gamble. Don’t take that chance.