Millions of UK workers risk losing up to £100,000 from their retirement savings by overlooking small but long-term pension contributions, according to new research. The Institute and Faculty of Actuaries (IFoA) has warned that even minor delays or omissions can have a substantial effect on pension pots over a lifetime.
For a typical worker, failing to contribute an additional 1% of their salary over a 40-year career could result in a six-figure shortfall. The findings highlight the importance of early, consistent pension saving – a factor many underestimate when balancing competing financial priorities.
Missed Opportunities Through Delayed Pension Saving
The IFoA report underlines that one of the most costly mistakes individuals make is postponing pension contributions. According to the organisation, starting a pension at 35 rather than 25 could reduce the final pot by as much as £300,000 – from £800,000 to £500,000 at retirement age. The difference is driven largely by compound interest, which magnifies the benefit of early contributions over time.
Automatic enrolment schemes have helped millions of employees build retirement savings without active decision-making. However, 4.25 million self-employed workers remain outside this framework and must establish their own pension arrangements. For many, pension saving competes with more immediate demands such as paying off debt, covering living expenses, or saving for a first home.
The IFoA notes that this trade-off is often unavoidable, but urges workers to prioritise pension saving where possible, warning that “never starting a pension could mean working far longer than desired.” Tax relief and employer contributions, when available, further enhance the benefits of early investment.
The Role of Policy and Public Awareness
While individual action is critical, the IFoA points to gaps in the current system that leave certain groups at greater risk. Workers in irregular employment, those on low incomes, and the self-employed face additional barriers to consistent saving. As of March 2024, a significant proportion of the UK workforce still does not benefit from automatic enrolment, limiting their exposure to the discipline and advantages of regular contributions.
According to the IFoA, targeted policy interventions could help close these gaps. Proposals include extending automatic enrolment to self-employed workers, introducing flexible contribution schemes for those with variable incomes, and improving public education about the long-term value of pensions. Such measures could help ensure more people benefit from compound growth and avoid large shortfalls in later life.
The IFoA emphasises that pension decisions “do not occur in a vacuum” and must be considered alongside broader life circumstances, including health, location, and family responsibilities.
