Starting to invest at 35 rather than 25 can more than halve your pension pot
Starting to invest at 35 rather than 25 can more than halve the retirement pot you end up with, and the mathematics behind that claim are straightforward and well-evidenced. A single decade of lost compounding is often worth more than every pound you contribute over the rest of your working life.
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The numbers that make the case
Aviva’s figures, updated in November 2024, illustrate this starkly. Investing £10,000 at age 25 at a 4.5% annual return, net of charges, grows to around £58,000 by age 65. Wait until 35 to invest that same £10,000 and the pot reaches only around £37,000. The difference is not a rounding error: those 10 extra years of compounding result in roughly 64% more growth, and Aviva’s 4.5% assumption is deliberately conservative to account for fund charges.
The picture is even sharper when you model regular monthly contributions rather than a single lump sum. Contributing £200 a month from age 25 at a 7% annual return could accumulate to roughly £525,000 by age 65. Start the same contributions a decade later and the outcome falls well short of that. Scaling up to £500 a month, starting at 25 and investing at 7% over 40 years, could produce more than £1.2 million. The same contribution from age 35 might reach around £600,000. The halving claim in the headline is not marketing exaggeration: it is consistent across a wide range of assumed returns, from Aviva’s cautious 4.5% through to a 7% gross equity approximation.
Why time beats contribution size
The counterintuitive core of compounding is that the size of each individual contribution matters less than how long those contributions have to grow. Consider an investor who puts away £2,500 a year from age 20 to age 30 and then stops completely. At 7% annual growth, that £25,000 in total contributions reaches roughly £199,000 by age 65. Compare that with someone who saves £5,000 a year from age 40 to 50, contributing £50,000 in total, double the outlay: that pot reaches only around £171,000 by 65. The early saver wins with half the money invested, purely because the compounding clock started sooner.
This is the mechanism behind the headline figure. The investor who starts at 25 contributes 10 additional years of cash, but those early years are not just adding contributions. Each year’s contributions have more time to generate returns, and those returns then generate their own returns. By the time the 35-year-old starts investing, the 25-year-old’s pot has already accumulated years of compounded growth that can never be fully caught up with higher contributions alone.
A useful way to frame it: in one real-world illustration using 7% returns and $200 monthly contributions (the maths is currency-agnostic), the 25-year-old ends up with roughly $512,700 versus the 35-year-old’s $242,600 at retirement. That extra decade cost an additional $60,000 in total contributions but generated nearly $270,000 more at retirement. The extra compounding was worth more than every dollar contributed over the entire investment period.
Where to invest: ISAs and SIPPs explained
Understanding the maths is only useful if you know where to actually put the money. For UK investors, two tax-efficient wrappers stand out: the Stocks and Shares ISA and the Self-Invested Personal Pension, or SIPP.
The Stocks and Shares ISA allowance for 2025/26 is £20,000 per tax year. Any growth inside the ISA is completely free of capital gains tax and dividend tax, and there is no tax to pay when you withdraw. This makes it straightforward: you contribute from taxed income, the money grows untouched by HMRC, and you can access it at any age. For someone who wants flexibility alongside long-term growth, a Stocks and Shares ISA is often the most accessible starting point.
A SIPP works differently, and the tax relief is the main attraction. For every £100 you contribute, HMRC tops up a basic rate taxpayer’s contribution automatically, so a £100 contribution into your pension only costs you £80. Higher rate taxpayers can claim a further 20% through their self-assessment tax return, effectively getting £100 of pension contribution for £60. Growth inside a SIPP is tax-free, but unlike an ISA, you cannot access the money freely. The current minimum access age is 55, rising to 57 in April 2028. When you do draw from a SIPP, 25% of the pot can be taken as a tax-free lump sum; the rest is treated as taxable income.
For most people starting out, using both wrappers makes sense: the SIPP captures the tax relief on contributions, which immediately boosts the amount invested, while the ISA provides flexibility if you need to access funds before retirement age.
The role your employer plays
If you are employed and enrolled in a workplace pension, your employer is already making contributions on your behalf. Under auto-enrolment rules, employers must contribute a minimum percentage of your qualifying earnings, and you contribute a share too. Not engaging actively with this, or opting out, is one of the most direct ways to give up free money. Checking what your employer contributes and increasing your own contributions where possible is a practical first step that costs less than many people assume, because of the tax relief on top.
What this means for you
If you are already in your mid-30s and reading this with a familiar sense of having missed the optimal starting point, the practical message is not despair but urgency. The maths does not become irrelevant at 35: you still have 30 or more years of compounding ahead of you, which is a substantial runway. What changes is that you cannot afford to delay further. Each additional year of inaction has the same compounding cost as the ones already lost.
Increasing your contribution rate is the most direct lever you now have. Because you have less time for compounding to do the heavy lifting, the size of your monthly contributions carries more weight than it would for a 25-year-old. Making use of the full ISA allowance, maximising pension tax relief, and reinvesting any salary increases rather than absorbing them into lifestyle costs can go a meaningful way towards closing the gap.
One important regulatory note: the minimum age for accessing your pension rises from 55 to 57 in April 2028. If you are planning retirement in your mid-50s, that change affects your timeline and is worth factoring into any plans you make now.
Verdict
The case for starting early is not about discipline or virtue: it is about arithmetic. The compound growth generated in your 20s is structurally irreplaceable, and waiting a decade can do more damage to your retirement pot than almost any other single financial decision. If you have not started, starting today is not the second-best option: given that the past cannot be recovered, it is the only option worth focusing on.
Frequently asked questions
Is it too late to start investing at 35?
No. Starting at 35 still gives you 30 or more years of compound growth before a typical retirement age. The maths is less forgiving than starting at 25, but a 35-year-old who starts now will significantly outperform someone who waits until 45. The key is to start with the highest contribution you can sustain and increase it as your income grows.
Should I prioritise a Stocks and Shares ISA or a SIPP?
Both serve different purposes and most people benefit from using both. A SIPP provides upfront tax relief on contributions, which boosts the effective amount invested from day one. A Stocks and Shares ISA offers flexibility because you can access it at any age without tax on withdrawal. If your employer offers pension matching, maximise that first, then use whichever wrapper fits your timeline and access needs.
What return rate should I assume when planning my investments?
Aviva uses 4.5% as a conservative, post-charges assumption for UK investors. A 7% figure is a common gross approximation for equity markets over the long term, before charges. The qualitative conclusion, that starting earlier produces dramatically more, holds across both rates. Using a lower rate when planning is prudent, so you are not disappointed if markets underperform expectations.
When can I access money in a SIPP?
Currently at age 55, but this rises to 57 in April 2028. You can take 25% of your pension pot as a tax-free lump sum; the remainder is drawn as taxable income. An ISA has no minimum access age and is more flexible if you want options before your late 50s.
Does it matter which funds I invest in, or is the wrapper enough?
The wrapper provides the tax efficiency, but the underlying investment still matters. Holding cash inside a Stocks and Shares ISA earns minimal growth and misses the compounding benefits this article describes. For long-term investors with a 20-plus year horizon, low-cost global equity index funds are a widely used starting point, though your own circumstances and risk tolerance should guide any specific choices.
The difference between a comfortable retirement and a constrained one often comes down to decisions made, or not made, in your 20s and 30s. The sooner you start, the less each individual contribution has to work, and the more time can do the heavy lifting for you.
DashLink is not authorised or regulated by the Financial Conduct Authority. This article is for general information only and does not constitute financial, investment or tax advice, or a personal recommendation. Tax treatment depends on your individual circumstances and rules can change. If you are unsure whether a product or course of action is right for you, speak to a regulated independent financial adviser.
