One in three UK pension savers increase monthly contributions, Standard Life finds

One in three people saving into a workplace pension have voluntarily increased their monthly contributions, new research from Standard Life shows, a shift savers say is intended to improve prospects of a comfortable retirement.

The Standard Life survey of 6,000 people who are saving into their employer's pension scheme — weighted to be representative of the UK population by age, gender and geography — also found that about one in 10 pension holders have made one-off lump-sum payments into their pots. The firm calculated that increasing monthly contributions from 5 percent to 7 percent could add about £52,000 to a retirement pot and produce a total pot of about £262,000 over a working life, using an illustrative example of someone starting work at 22 on a £25,000 salary and retiring at 68.

Under automatic enrolment rules, employers must contribute at least 3 percent of qualifying earnings between £6,240 and £50,270 into an employee’s pension unless the worker opts out. Employees are required to put in at least 5 percent of their qualifying earnings, a figure that includes the 1 percent top-up delivered by tax relief for basic-rate taxpayers.

Standard Life said some savers are increasing payments to take advantage of employer matching schemes, in which employers agree to pay a higher percentage if the employee contributes more. Others appear to be responding to financial guidance urging more proactive saving to reduce the risk of insufficient retirement income. The firm also modelled the effect of periodic lump sums, finding that nine one-off payments of £1,000 every five years between ages 25 and 65 could increase a pension pot by roughly £11,000 under the same assumptions about salary, investment growth and charges.

“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,” said Dean Butler, managing director for retail direct at Standard Life. He urged savers to check whether their employers will match additional contributions and to consider using salary sacrifice, directing pay rises into pensions and making lump-sum payments from bonuses or windfalls when possible.

Butler also advised savers to monitor annual contribution limits, noting the tax-advantaged annual allowance is generally the lower of £60,000 or 100 percent of annual income, and to review contributions regularly to reflect changing circumstances. He recommended maintaining an emergency buffer of three to six months’ expenses before accelerating pension contributions.

The findings come as the government has launched a Pensions Commission to examine barriers preventing people from saving enough for retirement. The commission, set to report in 2027, will investigate why nearly half of working-age adults save nothing into a pension and why nearly 15 million people may be under-saving, the government said.

Industry and consumer guidance emphasise steps savers can take if worried their retirement income will be insufficient. Pension holders are advised to obtain current fund values and transfer values from their schemes, check whether their pensions are defined contribution or defined benefit, and establish whether any guarantees would be lost by moving funds. Combining private pension projections with expected state pension entitlements — the full new state pension is currently £230.25 a week, roughly £12,000 a year — is part of building a retirement income picture.

Pensions in the private sector are now predominantly defined contribution arrangements, in which investment risk and growth accrue to the saver, replacing many of the earlier defined benefit schemes that provided a guaranteed income. Savers considering consolidating old pension pots are cautioned to verify any penalties or guaranteed benefits tied to existing arrangements and to use the government’s free pension tracing service to locate lost pots.

Standard Life’s research underscores how relatively modest, consistent increases can materially affect long-term retirement outcomes and that employer contributions and tax relief amplify those effects. The government commission’s work over the next two years is expected to explore structural and behavioural obstacles to higher saving and may inform policy changes intended to narrow the gap between current working-age saving behaviour and the levels judged necessary for adequate retirement incomes.