Small monthly pension top-ups can add tens of thousands to retirement pots, Standard Life finds
Study shows one in three workplace savers have increased monthly contributions; a rise from 5% to 7% could add about £52,000 under typical assumptions
One in three people saving into workplace pensions have voluntarily increased their monthly contributions to boost retirement prospects, new research from Standard Life shows, and modest top-ups can add tens of thousands of pounds to a final pension pot.
The firm’s modelling suggests that someone who increases employee contributions from 5 percent to 7 percent could accumulate about £52,000 more and reach a pot of roughly £262,000 over a full working life under a set of typical assumptions: starting work at age 22 on a £25,000 salary and retiring at 68. The study surveyed 6,000 people saving through employer schemes and was weighted to be representative of the UK population by age, gender and geography.
Standard Life said the increase in voluntary saving is partly driven by employees taking advantage of higher employer matching where available, and partly by individuals responding to calls from financial advisers and consumer campaigns to save more proactively. Under auto-enrolment rules, employers must contribute at least 3 percent of qualifying earnings between £6,240 and £50,270, while employees must contribute a minimum of 5 percent, a figure that includes the 1 percent tax relief top-up.
The research found one in 10 workplace savers had also made one-off lump-sum payments into their pensions. Using the same modelling assumptions, Standard Life calculated that making nine separate £1,000 contributions every five years between ages 25 and 65 would boost a pension pot by about £11,000 by retirement.
Dean Butler, managing director for retail direct at Standard Life, said small, consistent increases matter. "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," he said, adding that employer matching on additional contributions can magnify the benefit.
Financial advisers and pension providers routinely encourage savers to check whether employers will increase contributions if employees do the same, to consider salary sacrifice arrangements that can lower National Insurance costs, and to use pay rises as triggers for higher pension contributions. Tax relief on pension payments means a contribution can cost less net to the saver, particularly for higher-rate taxpayers, and occasional lump sums such as bonuses or inheritances can accelerate long-term growth without affecting monthly budgets.
Savers are also advised to keep limits in mind. Most people can contribute up to the lower of £60,000 per tax year (including employer contributions) or 100 percent of their earnings without a tax charge, but rules vary for higher earners and those with large existing pension pots. Regular reviews of contributions are recommended to ensure saving remains affordable alongside other financial priorities and to check whether the individual remains on track for a desired retirement income.
The findings come as the government has set up a Pensions Commission to examine obstacles that leave many working-age adults under-saving. The commission will report back in 2027 after investigating what it described as "complex barriers" that prevent sufficient retirement saving. Government figures show almost half of working-age adults are saving nothing into a pension and that nearly 15 million people are under-saving for retirement despite the rollout of auto-enrolment.
Savers concerned about shortfalls are urged to review their existing arrangements. Key questions to ask pension schemes include the current fund value, any transfer value and potential penalties to move a fund, whether the scheme is defined benefit or defined contribution, and whether any guarantees would be lost on transfer. Individuals should add projected private pension income to expected state pension benefits when assessing likely retirement income; the full new state pension is currently about £230.25 a week.
Anyone who has lost track of older pension pots can use the government’s free pension tracing service, though consumers should be wary of commercial firms that mimic the service and charge fees for basic tracing. For those interested in building a pension independently, self-invested personal pensions (SIPPs) are offered by a number of providers at varying fee levels, and savers should compare costs, investment choice and services when selecting a platform.
Standard Life’s analysis and advisers’ guidance underline that even relatively small adjustments to monthly contributions, and occasional lump sums when circumstances allow, can materially change retirement outcomes over decades of compound growth. The firm recommended that savers start early, contribute consistently and check for employer matching to maximise available benefits.
