Start Saving for Retirement: 5 Essential Steps for Young Savers

Retirement might feel like a million years away, but here’s the cold, hard truth: starting early is the biggest financial advantage you’ll ever have. You don’t need to earn a fortune or become an investment guru - just start now, even if you can only afford small amounts. Time and compound growth will do the heavy lifting.

Here are five simple, powerful ways to start building your retirement wealth while you’re young and set yourself up for a future that doesn’t involve working until you drop.

1) Make the most of your Workplace Pension

If you’re employed and over the age of 22, chances are you’ve already been enrolled into a Workplace Pension scheme by your employer.

The government’s auto-enrolment rules stipulate your employer has to contribute at least 3% of your qualifying salary, and most people will have a 5% contribution set up to be taken from their pre-tax earnings automatically.

On top of this, you automatically get tax relief on your contribution from the government at your marginal rate of Income Tax. This means basic rate taxpayers get a 20% boost, whilst higher and additional rate taxpayers can claim up to a total of 45% relief via a self-assessment tax return.

For illustrative purposes only. Assumptions based on a typical relief at source scheme.

It makes sense to make the most of this early on in your retirement saving. You’re benefitting from your employer adding money you wouldn't otherwise see, a government top-up in the form of tax relief, and all without the hassle of having to set up and manage a separate investment portfolio by yourself.

Though it's possible to opt out of your Workplace Pension scheme - for example, when money gets tight and you'd rather focus on boosting your current income than your future savings - it's generally wise to avoid doing this. After all, you're essentially turning down free money from your employer.

2) Start investing - and don't be shy

Putting your retirement savings in a cash account might feel like a safe, sensible thing to do. Cash is reliable, after all, and you want to make sure your pot is protected. However, over the long term inflation eats away at the value of cash savings.

Historical evidence indicates that investing - although it can be a bumpier ride - actually delivers significantly better returns over longer periods of time. Therefore pensions and other long-term savings should ideally be invested to give your money the best chance to grow and outpace inflation.

The case for long-term investing: Cash vs stock markets

When you pay into a pension, your money is typically invested in a mix of assets as part of your overall portfolio, such as:

• Shares

• Bonds

• Funds

The ideal blend of assets in your portfolio - your "asset allocation" - may differ depending on your goals.

Shares are typically considered high risk, compared to less volatile assets like cash and bonds, but also tend to deliver the best returns for long-term savers. This is why people starting their retirement saving journey are generally advised to opt for more high risk investments.

Though you might need to stomach some peaks and troughs in the short term, you're giving your savings the best chance to capitalise on stock market growth. You'll also benefit from the power of compounding, where your gains stack up over time - like the snowball effect.

Younger savers may decide their Workplace Pension scheme is invested in a portfolio that's playing it a bit too safe. However, you may have the option to switch to a higher growth fund if you're comfortable taking on more risk.

1. Firstly, log in to your Workplace Pension provider's portal (Nest, Aviva, Legal & General, etc - contact your HR department if you're not sure how to do this) and look at what fund you're invested in.

2. You will typically be enrolled in some kind of "default" or "lifestyle" fund with a moderate risk level designed to cater to as many people as possible.

3. Check if you have the option to manually switch your savings to a fund of your choice, such as one with a higher exposure to shares. You may need to contact your employer to complete this process.

If you're decades away from retirement and are content to weather some short-term wobbles in the name of long-term gain, switching your default Workplace Pension scheme to a higher risk fund could help you maximise your pension potential. Remember your employer contributions and tax relief can turbo-charge your savings even further.

3) Get more government top-ups with a Lifetime ISA

The Lifetime ISA (LISA) is one of the best tax-free savings vehicles for young people who want to save for retirement.

You can contribute up to £4,000 a year, and the government will top it up with a 25% bonus. That’s up to £1,000 of free money every year - just for saving! So if you've maxed out your Workplace Pension potential and you're in a position to put more money towards your retirement, a LISA could help you pump up your pot with an extra £5,000 per year (with only £4,000 of that coming out of your own pocket)!

For illustrative purposes only.

There are a few rules to bear in mind when it comes to Lifetime ISAs though, so make sure you've considered these key facts before opening an account. You could land yourself with a hefty penalty if you withdraw your cash for an unqualified purpose.

Lifetime ISA restrictions:

You must be aged 18–39 to open one

You can only withdraw funds for retirement savings from age 60 (or to purchase your first property)

You get slapped with a 25% penalty if you withdraw for any other reason

If you're comfortable with this and are still keen to open a LISA, there are plenty of options to mull over, and it can be tricky to work out which Lifetime ISA provider is actually offering the best deal. Fortunately, that's where we come in!

Every year, Boring Money crawls the LISA market to find the best providers out there. We perform rigorous testing with live accounts, collate thousands of real customer reviews, and spend hours putting customer services through their paces to find the winners of our coveted Best Buy LISA award. Click the link below to see who we've recognised in 2025.

4) Prioritise pay rises and bonuses for saving

When you’re early in your career, money can be tight, so it can be tempting to spend pay rises and bonuses on little luxuries like the odd holiday or a new car. Whilst there's absolutely nothing wrong with spending some money on yourself - especially in reward for your hard work - you may want to consider siphoning windfalls like this into your pension.

For example, instead of spending your full pay rise, you could increase your Workplace Pension contribution to divert part of it to your savings. You’ll never miss the money - as it goes straight into your pot - and the extra cash can boost your savings without sacrificing your current standard of living.

For illustrative purposes only.

5) Stay consistent

Finally, the idea of saving for retirement can feel overwhelming. We're living longer than ever before, and with the cost of living on the up and the later life care fees through the roof, it's hard not to feel like it's a race against time to pack as much money into your pot as possible.

However, the truth is, the most helpful and important thing you can do to maximise your pension potential is to start early and stick to it - even if you can only commit to small amounts. Saving consistently over decades will allow your money to grow thanks to the magic of compounding.

You don't even need to fuss; Once you've settled on your contributions, checking in once or twice a year to check your progress or make tweaks (if you need to) is usually more than enough.

It’s important to create a balance of enjoying the present day, but also planning for a financially secure and enjoyable future. Retirement might seem an impossibly long way off just now, but no-one truly knows how they’ll feel about work in the future. The secret to having flexibility is to start building now. Whether you’re in your 50s, 40s, 30s, 20s or even younger, it’s never too early to start. It’s why both of my children received pension plans for their 1st birthdays!

Graham WellsFounder and Chartered Financial Planner, GroWiser Financial Coaching

It can be helpful to think of long-term investing like planting a tree. You wouldn't dig it up every week to see how it’s growing. You feed it, water it, wait, and trust the process. Consistency is key!