How a small monthly boost could add £52,000 to your pension pot

One in three pension savers have voluntarily hiked monthly payments into their pot to improve their prospects of a comfortable retirement, new research reveals. Many are likely to be maxing out free extra contributions from employers which offer to pay in a higher percentage of your salary if you do as a perk of the job.

But others might have heeded money experts’ encouragement to save more proactively to achieve a decent income in old age, even if their employer only puts in the minimum required. Under auto enrollment, employers are required to put at least 3 per cent of your earnings between £6,240 and £50,270 into your pension, unless you opt out. You must put in at least 5 per cent on your own behalf, although that includes the 1 per cent free top-up you get from tax relief.

One in 10 people with a workplace pension have also put one-off lump sums into their pensions, according to the study by Standard Life. The firm says someone boosting monthly contributions from 5 per cent to 7 per cent can save £52,000 more and reach a £262,000 pot over their working life, assuming they start working at age 22 on a salary of £25,000 and retire at 68. Below are the increases you could see after hiking contributions by different amounts each month.

Standard Life surveyed 6,000 people who are saving into their employer’s pension scheme, but other than that they were weighted to be representative of the UK population on age, gender and geography. ‘It’s great to see so many people taking charge of their financial future – and the best part is, you don’t need to make huge changes to see a big impact,’ says Dean Butler, managing director for retail direct at the firm. 

‘Even small top-ups, whether monthly or occasional, can add up to tens of thousands of pounds over a working lifetime. ‘Starting early and contributing consistently is key, and some employers will match additional contributions, giving your savings an even greater lift. If you’re able to save more, your future self is likely to thank you.’

Standard Life has also calculated that making nine one-off payments of £1,000 every five years between the ages of 25 and 65 could boost your pension pot by £11,000 by retirement age. That is based on the same assumptions about salary, investment growth, charges and so on as in the table above.

The Government recently launched a Pensions Commission to try to stop future retirees ending up poorer than older people today. It says nearly half of working age adults are saving nothing at all into a pension – despite the success of auto enrollment into work schemes – and nearly 15million people are under-saving for retirement.

It will explore the ‘complex barriers stopping people from saving enough for retirement’, and report back in 2027.