Pensions, explained
The State Pension, workplace pensions and SIPPs for 2026/27 – and why the age you start can matter more than the amount. With investments your capital is at risk; past performance is not a guide to future returns.
The State Pension
- Full new State Pension 2026/27: £241.30 a week (about £12,548 a year). This is for people who reached State Pension age on or after 6 April 2016.
- You usually need 35 qualifying years of National Insurance (paid or credited) for the full amount, and at least 10 qualifying years to get anything. With 10 to 34 years you get a proportion: for example, 20 years gives 20/35 of the full rate.
- You can check your forecast and any gaps on GOV.UK, and see your State Pension age. It's currently 66 and rising to 67 between 2026 and 2028.
Workplace pensions and auto-enrolment
- Employers must automatically enrol workers aged 22 to State Pension age who earn over £10,000 a year (the earnings trigger, unchanged for 2026/27).
- The legal minimum is 8% of qualifying earnings, with at least 3% from your employer. Your own contribution includes tax relief.
- Qualifying earnings for 2026/27 are those between £6,240 and £50,270 a year. Many employers pay more than the minimum or use your full salary.
- If you opt out, you usually lose your employer's contribution.
SIPPs and tax relief
A SIPP is a personal pension where you choose the investments. The rules on tax relief, the £60,000 annual allowance and access age (55, rising to 57 on 6 April 2028) are covered in our Investments guide. In short, a basic-rate taxpayer paying in £80 gets £100 in their pension. Anyone, including children and non-earners, can pay up to £2,880 a year (net) and receive tax relief, making £3,600 gross.
Starting very young: worked examples
Same contribution, different start ages. Each person pays £100 a month (gross, including tax relief) until 67.
| Start age | Years saving | Total paid in | Pot at 67 | In today's money |
|---|---|---|---|---|
| 18 | 49 | £58,800 | £206,384 | £78,211 |
| 25 | 42 | £50,400 | £144,689 | £62,984 |
| 35 | 32 | £38,400 | £83,692 | £44,410 |
| 45 | 22 | £26,400 | £44,321 | £28,668 |
Starting at 18 rather than 45 means paying in about 2.2 times as much in total, but the pot at 67 is nearly five times larger under these assumptions, because early contributions have decades longer to compound.
Junior SIPP example
A parent pays £2,880 a year into a Junior SIPP from birth until the child's 18th birthday. Tax relief tops it up to £3,600, so £64,800 goes in, of which £51,840 is from the parent. With no further contributions and the same assumptions, the pot at 67 would be about £840,774, or about £223,084 in today's money. The money is locked away until the child reaches minimum pension age (57 from 2028; it may rise further).
Start age vs pot at 67
Pot at 67 in today's money, same contribution, starting at 18, 25, 35 and 45
Assumptions: contributions are paid at the end of each month and include tax relief; growth and charges compound monthly at a steady rate ((1 + growth) × (1 − charges) a year); "today's money" divides by inflation over the years saved; contributions don't rise; tax on withdrawal is ignored. This is an illustration, not a forecast. Your capital is at risk.
Time in the market vs timing the market
Trying to sell before falls and buy back before rises ("timing the market") is very hard to do consistently. Some of the biggest daily gains have come soon after the biggest falls, so investors who sell in a panic often miss the recovery.
J.P. Morgan Asset Management's Guide to Retirement 2026 illustrates this with the US S&P 500 Total Return index. $10,000 invested from 2 January 2006 to 31 December 2025 grew to $80,619 (11.0% a year) if fully invested, but only $35,866 (6.6% a year) if you'd missed the 10 best days and $21,177 (3.8% a year) if you'd missed the 20 best days. It also notes that six of the 10 best days came within two weeks of the 10 worst days. These are US market figures in dollars, gross of fees, and past performance is not a guide to future returns.
Pound-cost averaging
Paying a fixed amount in every month, as most pension savers do, means you buy more fund units when prices are low and fewer when they're high. It doesn't guarantee a profit or protect against loss, but it smooths your average purchase price and removes the temptation to guess the "right moment".
Sources (checked 12 October 2026): GOV.UK – The new State Pension: what you'll get; GOV.UK – The new State Pension: your National Insurance record; GOV.UK – Check your State Pension age; GOV.UK/DWP – Automatic enrolment earnings trigger and qualifying earnings band review 2026/27 (18 Dec 2025); GOV.UK – Workplace pensions: what you, your employer and the government pay; GOV.UK – Tax on your private pension contributions; GOV.UK – Annual allowance; HMRC Pensions Tax Manual PTM062100 – pension age; J.P. Morgan Asset Management – Guide to Retirement 2026 (US edition), 'Impact of being out of the market', data as of 31 Dec 2025.