Workers who increase their pension contributions by just 2% could build significantly larger retirement pots over their careers, according to new calculations from Standard Life. The retirement savings provider said the difference could amount to around £52,000 by the time a saver reaches retirement age.
The findings come as many UK adults report uncertainty about their financial future and retirement planning. Standard Life said a large proportion of people believe their retirement outcomes are shaped by factors outside their control, while many admit they have done little preparation for later life.
For workers enrolled in workplace pension schemes, the calculations highlight how relatively small adjustments to contributions can accumulate over several decades. According to Standard Life, early and consistent increases can have a noticeable effect because of compound investment growth over time.
The analysis focuses on auto-enrolment pension contributions, where employees and employers both contribute toward retirement savings. Standard minimum contributions currently stand at 5% from employees and 3% from employers.
Higher Contributions Could Significantly Increase Pension Pots
According to Standard Life, a worker earning £25,000 from the age of 22 and contributing only the minimum auto-enrolment amounts could build a pension pot worth around £210,000 by age 68, measured in today’s prices. The company said increasing employee contributions by an additional 2% from the start of a career could raise that figure to approximately £262,000. That represents a difference of around £52,000 over a working lifetime.
The calculations assume annual salary growth of 3.5% and investment growth of 5% per year, while also accounting for 2% inflation. Mike Ambery, retirement savings director at Standard Life, said workers should check whether they are contributing enough to receive the maximum employer contribution available through their workplace pension schemes.
“Make sure you’re paying enough into your workplace pension to receive the full employer contribution available to you, if it’s affordable,” he said. “Many employers will match what you pay in up to a certain level, so if you’re contributing less than that, you could be missing out.” He also said small increases made early and maintained consistently can make “a meaningful difference over time.”
Many Savers Report Uncertainty About Retirement Planning
Standard Life’s research also examined attitudes toward retirement planning among UK adults. According to the company, 47% of respondents said they believed their retirement outcomes were largely influenced by factors outside their control. The findings suggest that uncertainty may be discouraging some people from engaging with long-term financial planning. Standard Life reported that 29% of respondents said they had done little or no planning for retirement.
Mr. Ambery said economic and global uncertainty may affect how people view their financial future and their ability to make long-term decisions. “Uncertainty at home and abroad can also make it harder for people to feel connected to their future, or confident about the decisions they’re making today,” he said.
He added that there are still practical measures people can take to strengthen retirement savings over time, including reviewing investment choices, increasing contributions where possible, and making full use of employer pension matching.
“Our analysis highlights the power small increases to pension contributions could have — building into a much larger pot over time, thanks to the potential power of compound investment growth,” Mr. Ambery said. “The key thing is staying engaged with your financial future and taking action when possible.”
