Small monthly pension top-up could add £52,000, Standard Life finds

About one in three people saving into a workplace pension have voluntarily increased their monthly contributions, and a modest rise could add tens of thousands of pounds to retirement pots, new research from Standard Life shows.

The firm says that someone who raises monthly contributions from 5 percent to 7 percent can accumulate about £52,000 more over a working life and reach an estimated £262,000 pension pot, based on a scenario in which the saver starts work at 22 on a £25,000 salary and retires at 68. Standard Life cautioned that the calculation rests on assumptions about salary growth, investment returns and charges.

Standard Life surveyed 6,000 people who save into their employer's pension scheme; the results were weighted to be representative of the UK population by age, gender and geography. The study also found that one in 10 workplace savers had made one-off lump-sum contributions to their pensions.

Under current auto-enrolment rules, employers must contribute at least 3 percent of qualifying earnings between £6,240 and £50,270 to employees' workplace pensions unless the employee opts out. Workers must contribute at least 5 percent of qualifying earnings themselves, a total that includes a 1 percent boost from tax relief.

Dean Butler, managing director for retail direct at Standard Life, said many people are taking small steps that can have a large long-term effect. "Even small top-ups, whether monthly or occasional, can add up to tens of thousands of pounds over a working lifetime," he said, adding that some employers will match extra contributions, increasing the benefit.

Standard Life also modelled the effect of periodic lump sums, saying nine one-off payments of £1,000 made every five years between ages 25 and 65 could increase a pension pot by about £11,000 under the same scenario assumptions.

The research comes as the UK government has launched a Pensions Commission to investigate barriers that prevent people from saving enough for retirement. The commission will examine why nearly half of working-age adults are saving nothing into a pension and why nearly 15 million people are under-saving, according to the government. It is expected to report its findings in 2027.

Auto-enrolment has been credited with increasing pension participation since its introduction, but industry and government figures have repeatedly warned that participation does not always translate into adequate retirement incomes. Standard Life's analysis highlights how incremental increases in contributions, and occasional lump sums, can materially alter long-term outcomes under commonly used modelling assumptions.

The Standard Life survey did not disclose the precise investment return or charge assumptions behind its scenarios, and the firm noted that individual outcomes will vary depending on factors such as salary trajectory, investment choices, fees and the length of time contributions are made.

Policy makers and retirement experts have pointed to employer matching of voluntary contributions as a significant lever for improving savers' outcomes, while urging that messages about the power of compounding and the value of starting early be made clearer to workers. The Pensions Commission will be tasked with exploring those and other complex barriers to saving, with a view to informing policy options to improve retirement preparation.

Standard Life's findings add to a body of research suggesting that modest behavioural changes—raising monthly contributions by a few percentage points or making periodic lump-sum payments—can substantially boost projected pension pots, though results depend on individual circumstances and the assumptions used in modelling.