I have £24,000 in a pension at 25 – I’ve been paying 10% since I started work

When Vishay Karia began working in a graduate consulting role just three years ago, he was earning £30,000 – around £5,000 lower than the average UK salary at the time. But despite living in London and facing high rental costs and bills, Vishay still opted to put 10 per cent of his salary – double the amount required – into his pension. His employer topped this up with 10 per cent contributions of its own, and now he has a private pot of £24,000 – already more than the £18,800 the average 30-year-old has, according to figures from Fidelity. Shorts Others his age would likely have focused on saving for more immediate priorities, but for Vishay, now 25, the maths didn’t add up. “I worked out, using an excel spreadsheet, that on my salary and [career] progression, I’d never save the £80,000 to £100,000 deposit I’d need to buy a home in the South East,” he says. “I decided to scrap that goal entirely, and move on to retirement.” Due to the way his employer matched pension contributions, and the income tax saving from paying into a retirement fund, Vishay worked out that while he was sacrificing some pay, the decision was a “no-brainer”. “Renting in London meant it was a squeeze, but that extra money wouldn’t have solved it,” he says. He was entered into his pension scheme via auto-enrolment, where employees pay at least 5 per cent and employers pay at least 3 per cent – although this can be increased as it was for Vishay and his employer. Vishay was taught to be proactive with his pension by his parents. They have already saved some money for his retirement in a junior self-invested pension, before he turned 18. With his work pension, he actively moved from his default, low-risk fund, which had heavy exposure to bonds, to a riskier fund that he hopes will deliver better returns through more investments in company equities. He’s part of a cohort of young people who are front-loading their pensions early in their career, knowing they can benefit from compound growth over time by building up retirement pots from a young age. Calculations by wealth management firm Quilter looked at how much someone who starts saving at 22 on a salary of £25,000 – and gets pay rises of 5 per cent a year – could make by front-loading their pension contributions in the first part of their working life. The calculations compared someone who contributes 15 per cent of their salary from age 22 to 32, then drops back to 8 per cent until retirement at 66, to a back loader – someone who pays more in later life – paying 8 per cent of salary from age 22 to 56 and increases contributions to 15 per cent from age 56 to 66. The front loader would contribute £324,297 to their pension, whereas the back loader would contribute £93,622 more – £417,919 – because their high contributions come later in their career when salaries are generally higher. Still, Quilter’s calculations found that if investment growth is over 5 per cent or more, the person who front-loads their pension would amass a bigger pot – even though they actually contribute a smaller amount. Vishay now runs a fintech startup aimed at American expats – he is a dual citizen having been born in the US – and though he has temporarily stopped saving while this gets going, he says he will restart contributions to a pension as soon as the startup can pay him a salary. “I see retirement saving as the last thing my generation can control. We’re priced out of buying a house, many are priced out of having kids, being able to stop work is something we can avoid being priced out of if we start saving early,” he says. He believes a lot of younger people would pay more into a pension instead of saving for a home – particularly those in London – if they’d done the maths he has. “I think lots of people would do this if they truly did the spreadsheet work. It’s almost impossible to buy in London without the help of the Bank of Mum and Dad,” he explains.