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It’s never too early, or too late, to plan to beat the State Pension

The day I arranged life insurance seems like only yesterday. I was 29 and I wanted to provide for my wife in the event of my death.

I got a good deal on a death and serious illness/injury policy with a 30-year term, just insurance with no endowment or anything like that added (and I’ve always found it puzzling how the two are combined). And it expired last year.

I made one claim for serious illness, but as I’m still alive I’m not too unhappy that my wife didn’t get to pick up the big money.

I’ve done a lot in the 30 years of my insurance policy, but wow, did the time go fast.

And the expiry of that policy really brought home to me what a folly it is for young people to ignore retirement planning as though it’s so far in the future that you don’t have to worry.

Start early

The best thing I ever did, even better than securing peace of mind about my wife’s security if I’d died young, was to start investing for our retirement at an early age. Now, we’re really not wealthy, but my wife and I have investments that should be enough to provide for a reasonably comfortable retirement. Not that I have any plans to retire just yet, as I enjoy what I’m doing.

The key lesson to me is that it’s never too early to start investing for your retirement, and I could have done better had I started even younger. After I left my first job, of the options I had with my modest company pension contributions, I chose to take the cash and spend it. It was the early 80s, and I can’t remember what I bought, but I remember it was about £1,000. 

Had I put that £1,000 into a stock market investment and secured a 6% return per year (which you could get today from Royal Dutch Shell dividends alone), it would now be worth an extra £7,700 to add to my pension pot.


In fact, if you’re starting out investing today at the same age I started working, can manage to put away £200 per month and achieve the same 6% target per year and reinvest all of your dividends, by the time you get to my age you’ll have around £380,000 in your pot. And this should rise with inflation if you can keep increasing your contributions over the years. And if you use a stocks and shares ISA, not a penny of it will be taxable.

But what if you’re not still in your 20s, you’re more my age, and you’re worried you haven’t made sufficient provision for your sunset years?

Not too late

As you’ll presumably be earning more than a fresh young worker, could you put away £500 per month if you cut out unnecessary expenditure? Even better, if your mortgage is already paid off, perhaps you could stash away a similar amount for your retirement.

Investing £500 per month and getting that same 6% return per year, would mean that in 10 years you’ll have accumulated more than £80,000. And when you get there, if you can mange 5% per year in dividends from that, it would add almost 50% to your State Pension income.

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Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.