Pension savers could boost their savings pots by £95,000 with one move, according to new analysis. Those who start planning for their retirement in their 20s can save nearly £100,000 more over their working lifetime, according to research by retirement specialist Standard Life.
Minimum contributions build £252,000 pot
People who stick to minimum auto-enrolment contributions of 5% from the employee and 3% from their employer throughout their career could build a retirement pot of around £252,000 by age 68, in today’s prices. However, increasing contributions by even one percentage point early in a career could add thousands of pounds, the analysis found.
Someone starting work at 22 on £30,000 and increasing their employee contribution from 5% to 6% could build around £283,000 by age 68 - a £31,000 difference. Increasing this further to 8% could result in around £347,000, adjusted for inflation – £95,000 more than sticking with minimum contributions throughout.
Small steps can lead to better outcomes
Emma Furlonger, managing director for workplace pensions at Standard Life, said: "Retirement can feel a long way off and there are plenty of more immediate demands on our money, so it can be easy to leave a pension ticking away in the background without giving it much thought.
“You don’t need to become a pension expert to make a difference. Simply knowing roughly what you’ve saved, checking what you’re paying in and seeing whether you’re on track are all useful places to start. Taking small steps to engage with your financial future today can lead to better outcomes later on."
Later career changes still matter
Emma noted that even if you are later on in your career, changing your pension payments at that stage "can still make a meaningful difference". A 50-year-old who increases their contributions by 2%, after making minimum contributions from 22, could build a pot of £274,000 by the age of 68 allowing for inflation. That works out at £22,000 more than the baseline.
