Waiting 10 years to invest in a pension pot more than doubles the annual contribution required to achieve a similar outcome, according to research by workplace financial wellbeing firm Wealth at work.
If someone aged 25 contributed a total of £2,400 per year into their workplace pension for 30 years (including both employer and employee contributions), they could build a pension pot worth £167,426 by age 55, assuming a 5 per cent annual investment return. However, if they delayed saving for 10 years and only started contributing at age 35, they would need to contribute £4,825 per year for the remaining 20 years to reach a similar pension pot of £167,520 by age 55.
The impact can be significant also because delaying contributions may mean missing out on employer payments, tax relief and years of potential investment growth.
Research conducted by Wealth at work among 2,000 UK workers with a defined contribution pension found that more than four in five (83 per cent) are concerned living cost pressures will leave them less comfortable in retirement due to a shortfall in pension savings, up from 81 per cent last year.
Concerns are particularly strong among younger workers, with almost half (46 per cent) of 18 to 24-year-olds and more than two-fifths (41 per cent) of 25 to 34-year-olds saying they believe they will never be able to afford to retire. This compares to an average across all ages of 38 per cent.
Jonathan Watts-Lay, director of Wealth at work, says: “There are currently around 15 million people in the UK who are under saving for retirement, and this could rise to 19 million without action.
“Pension Awareness Day (15 September) is an ideal opportunity to turn concern into action. By providing clear and tailored financial education, employers can help their employees to see the value of their workplace pension. This includes what the employee is paying, what the employer contributes, and how small changes could improve future outcomes.”
Wealth at work encouraged employees to check their current contributions, review whether they have more than one pension pot, consider their retirement income goal and know where to go for support.
