Pensions 101
Thinking about retirement might feel strange when you’re still at university but understanding pensions early gives you flexibility later down the line.
A pension is essentially a pot of money you build up during working life to support yourself when you stop working.
Types of pensions in the UK
There are three main types of pensions you’ll hear about:
1. State Pension
This is provided by the government based on your National Insurance (NI) record. You need at least 10 qualifying years of NI to get any State Pension, and around 35 years to get the full amount.
The State Pension age is currently 66 and is gradually increasing to 68. There may be further rises in the future.
2. Workplace Pensions
If you’re employed and meet certain criteria (e.g. earn over a set amount), your employer must auto-enrol you into a workplace pension scheme.
Money comes from:
- You
- Your employer
- Tax relief from the government
3. Personal Pensions
These are pensions you arrange yourself. They are useful if you’re self-employed or want to save extra on top of a workplace pension.
When can you access your pension?
Most private pensions (workplace or personal) can’t normally be accessed until at least age 55, rising to 57 in 2028.
The State Pension starts at the State Pension age (currently 66 and increasing).
That means money from your pension is generally locked away until later in life.
Why should you start thinking about pensions?
Even if retirement feels really far away, learning the basics now can help future proof yourself.
Pension savings benefit from compound growth, meaning the earlier you start paying in, the more time your money has to grow before you retire. Even small contributions now can accumulate into a larger pot later.
Workplace pensions also include employer contributions and tax relief, meaning more goes into your pot than just what you save yourself.
Case study - Compound growth and the power of starting early
Imagine two graduates saving £100 a month into a pension, earning an average 5% annual return, retiring at 68.
Start at 22: Contribute £55,200 over time. Pension pot ≈ £215,000
Start at 32: Contribute £43,200 over time. Pension pot ≈ £130,000
Starting just 10 years earlier could mean ending up with roughly £85,000 more, despite only paying in £12,000 extra.
This is an example of compound growth at work. Your money earns returns, and in return those returns earn returns (that’s a lot of returns!). Over decades, time does most of the heavy lifting.
Please note that these figures are for illustrative purposes only and are not financial advice! Investment returns are also not guaranteed.
Further information
Here are helpful official resources to explore the topic further:
MoneySavingExpert’s pension guide — explains how different pensions work and terms like tax relief and auto-enrolment –
https://www.moneysavingexpert.com/pensions/how-pensions-work
Save the Student’s pension article — written with students and graduates in mind.
https://www.savethestudent.org/money/pensions-plan-retire-uk.html
UK government pension pages — official details on state, workplace and private pensions - Plan your retirement income: Overview - GOV.UK https://www.gov.uk/plan-retirement-income
Rowan Artingstoll
LLM (Masters of Law)
Money Mentor
