More than a third of UK adults with a defined contribution pension increased their pension contributions the last time their income rose, according to research from Standard Life.
The research found that 34 per cent increased their contributions following a pay rise, promotion, bonus or change of job, while a further 19 per cent considered paying more.
This means 53 per cent either increased their contributions or considered doing so after their income rose.
However, 28 per cent did not consider actively increasing their contribution rate when their income last increased.
Standard Life said increases in earnings can provide an opportunity for people to review their pension contributions and consider whether they can afford to save more.
Its analysis shows that someone starting work at 22 on a £30,000 salary and making minimum auto-enrolment contributions of 5 per cent from the employee and 3 per cent from the employer could build a pot of around £252,000 by age 68.
Meanwhile, increasing employee contributions from 5 per cent to 7 per cent from age 30 could increase the pot to around £302,000, while a 9 per cent increase could take it to around £353,000.
Standard Life said pension contributions can also benefit from tax relief, while salary sacrifice can reduce employee National Insurance contributions.
Standard Life managing director for workplace and retail intermediary Emma Furlonger says: “It is really encouraging to see that more than a third of people increased their pension contributions the last time their income rose, and that even more gave it some thought. A pay rise, promotion or bonus can be a really useful moment to take stock of your finances and consider whether you could put a little more towards your future, and clearly people understand the benefits of doing so.
“What’s important to remember is that you don’t have to direct your entire pay rise into your pension. If it’s affordable, putting aside a small proportion before becoming accustomed to the additional pay can be a manageable way to strengthen your retirement savings while still enjoying the benefit of earning more.
“A pay rise can be a great opportunity to review your pension contributions. For some people, directing part of an increase into their pension can be a tax-efficient way to boost retirement savings. Where employers offer salary sacrifice, there may also be National Insurance savings, meaning the effect on take-home pay could be smaller than expected. The right approach will depend on your individual circumstances, but it’s worth taking a moment to understand the options available to you.
“Pension Engagement Season is a good prompt to understand what you and your employer are currently contributing, check whether you are on track and think about whether your next pay rise, bonus or other change in circumstances could be an opportunity to give your future finances a boost.”
