Aged 43, I’ve enough in my pension to last just TWO years – despite being careful with money, says JOE MINIHANE. Here’s what I wish I’d known earlier… don’t make my mistakes

My pension savings have hit £27,412. In cash terms, that may sound like a decent sum. But right now, that’s all I have to last me for my full retirement. That, I’m told, would be enough to cover around two years of outgoings – and that’s assuming I’m willing to make do with a minimum standard of living.

According to industry body the Pensions And Lifetime Savings Association, it would just about cover the basics, plus a self-catering holiday in the UK once a year and eating out perhaps once a month.

You may think it’s my own fault and that, at the age of 43, I should have put away more by now. But the thing is, I have been careful with money all my life, have never taken on debt and have always saved.

It’s a terrifying reminder that even the prudent among us, who have worked all our lives, can come unstuck with pension saving. There’s so much I wish I’d known sooner.

I started my career in journalism in 2005 and every company I worked for offered me a pension. Each time I felt I had to turn it down. I was young, renting in London and the cost of living was high.

In my first job I earned £1,500 a month, and that had to cover rent of £600, tax of around £300, a travelcard to get to and from work, plus bills, food and day-to-day living. I also wanted a bit of money to go out because I was young and living my dream in London. Saving for retirement was not an option and, if I’m honest, neither was it something I gave much thought to – it was such a long way away.

Four years later I became a self-employed writer and so the money I earned was no longer paid on a set date. Rather than being frightened by this prospect, though, I followed the advice my grandad had given me as a child and kept a keen eye on my incomings and outgoings. His mantra of ‘don’t buy what you can’t afford’ meant I never had a credit card or spent on things I didn’t need.

As my career took off and I started earning more, I saved into a tax-free Isa, but not with retirement in mind. At first I saved up so that my now-wife Keeley and I could spend six months travelling around Asia. I saved £20,000 and spent half.

When we returned, aged 30, we started saving for a house and managed to get £30,000, buying a small flat in Brighton in 2016, when I was 34.

We had our first child a year later, which, inevitably, came with a high financial cost.

It wasn’t until November 2019, aged 37, that it dawned on me that I needed to save for retirement. Middle age and parenthood sharpened my mind and gave me a new perspective on life.

It wasn’t just the immediate needs of me and my family that had to be considered – I had to tend to the future as well.

I was never educated about this at school or university. It was certainly not something I spoke about with friends. It was only when a fellow writer told me that he had set up his own pension and that I could too in a matter of minutes that I decided to look into it.

As soon as I did, I knew I had to get started immediately. Now I pay £400 each month into a self-invested personal pension (Sipp). A Sipp is a pension you can set up and manage yourself. You can dial your contributions up or down depending on how much you can afford each month.

Like all pensions, it benefits from tax relief from the Government. As I’m a basic-rate taxpayer, I get an extra 20 per cent added to my pension for every sum that I put in. Higher rate taxpayers get 40 per cent added and additional rate 45 per cent. Unfortunately, as I’m self-employed, I don’t get contributions from an employer as other workers do, and I have to manage my pension myself rather than receiving one automatically through my workplace.

If I’m able to keep saving at this level, I should be able to retire with a pot of £219,234 in 2049, when I hit the current state pension age of 68. If things go well, according to the pension calculator on the Nutmeg website, this could reach £368,786. Badly, and I’m looking at £141,150.

Of course, a lot could change. I could be forced to change my contributions and the value of my investments could fall.

If I stay on track, this could be enough to buy me an income of £12,300 at retirement – unlikely to be sufficient to maintain my current standard of living, even with the state pension to top it up.

I have to keep going though, because if I stopped saving now, my pot would get me a grand total of £1,647 a year from retirement age. Because I didn’t start earlier I am having to make sacrifices and save more now to improve my financial position.

Fortunately, I don’t consider it a hardship to forgo meals out, make coffee at home, opt for cheap camping holidays and resist my lifelong vinyl shopping habit.

I don’t really mind right now. But I can’t help but think what a better position I would be in if I’d saved even small amounts from my early 20s. If I’d started paying £250 into a pension pot at 21 and I’d benefited from contributions from an employer, I’d be looking at a nice income of around £25,000 per year from the age of 68 – on top of the state pension.

The latest HMRC figures show 360,000 self-employed people are paying into a pension, but more than three million aren’t. There are good reasons for this. Low pay, poor understanding of how pensions work and the increased cost of living all take their toll. I should know – I had no clue how pensions worked until I was 37.

I wish there was an option for self-employed workers to have a default pension scheme, that we could opt in or out of when completing our tax returns.

And we need proper financial education in schools, teaching not just the value of money but the necessity to save for later life.

If there’s one thing I know now, it’s that time moves quickly.

One day you may find that you haven’t got enough to stop working and enjoy life while you still can. So best get saving.