Pensions and planning for the future

Retirement may feel a long way off, but saving early makes a big difference, thanks to compound growth.

Practise this lesson free (6 questions)

What is a pension?

A pension is money you receive when you retire (stop working), built up during your working life.
The State Pension is paid by the government. How much you get depends on your National Insurance record: in general you need 35 qualifying years for the full new State Pension and at least 10 years to get any.
The State Pension age is 66, rising to 67 between 2026 and 2028.

Workplace pensions

Employers must automatically enrol eligible workers into a workplace pension: those aged 22 to State Pension age who earn over £10,000 a year.
The worker and the employer both pay in. The minimum total is 8% of qualifying earnings, of which the employer pays at least 3%.
The government adds tax relief, and the money is invested to grow until you retire. You can also save in a personal pension.

Why start early?

Money invested for a long time grows through compound growth: growth on top of growth.
Figures rounded to the nearest pound. Investments can fall as well as rise, so growth is not guaranteed.
Years invested£1,000 growing at 5% a year
10£1,629
20£2,653
30£4,322
40£7,040
Worked example

Explain why starting a pension at 25 is better than starting at 45.

  1. Money saved at 25 has about 40 years to grow before retirement, compared with about 20 years from 45.
  2. Because of compound growth, the extra years make a big difference: the growth itself grows.
  3. So the same amount saved earlier is likely to give a bigger pension.

Answer: Money has more time to grow through compound growth, so early saving builds a bigger pension.

Key idea

A pension provides income in retirement. The State Pension depends on your National Insurance record. Employers must enrol eligible workers (22 and over, earning over £10,000) in a workplace pension, with at least 8% paid in in total. Start early to benefit from compound growth.

Key words
Pension
Money received in retirement, built up during your working life.
Income
Money coming in, such as wages, pocket money or gifts.
National Insurance
A deduction from pay, above a threshold, that builds up entitlement to the State Pension and some benefits.
Insurance
Paying a premium so that an insurer will pay for certain losses if they happen.

All KS3 Citizenship key terms and definitions →

Quick check

Try two quick questions

See if it has sunk in. Answers are marked straight away.

Extra practice

2 more questions

Try each one, then tap to check.

  1. When do you usually receive a pension?

    1. When you start your first job
    2. When you leave school
    3. Only when you are ill
    4. After you retire
    Show the answer

    Answer: After you retire

    A pension provides income after you stop working.

  2. How many qualifying years of National Insurance do you usually need for the full new State Pension?

    1. 5
    2. 10
    3. 50
    4. 35
    Show the answer

    Answer: 35

    You generally need 35 qualifying years for the full new State Pension.

Check you have got it

Answer 6 quick questions with instant marking. If you get one wrong, GCSE-ready shows you why and gives you another go. It is free, and you do not need an account.

Practise this lesson free (6 questions)All KS3 Citizenship lessons

Video for this lesson coming soon. Subscribe on YouTube

Sources and references

Checked by the GCSE-ready editorial team, 16 October 2026. Last updated 2 October 2026. Spotted a mistake? Tell us and we will fix it.

Related lessons