You don’t have to just pay the minimum amount into auto-enrolment (Image: Getty)
A « small » move could increase your pension pot by up to £30,000, analysis shows. Under auto-enrolment, your employer sets up a pension for you if you are aged between 22 and the State Pension age, which is 66 for men and women, but set to rise to 67 between now and 2028.
You will also be automatically enrolled in a pension if you earn more than £192 a week, £833 per month or £10,000 per year, usually work in the UK and don’t already have a workplace pension. The minimum contribution adds up to 8%, made up of 5% from your wages – which includes 1% in Government tax relief – and 3% from your employer.
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But you don’t have to pay just the minimum into your retirement pot. It is possible to ask your employer to increase your contributions above 5%, with some employers matching your contribution, up to a certain point.
Analysis carried out by Standard Life found someone who started working on a salary of £25,000 per year at the age of 22, but contributed just 2% more than the minimum – 7% employee, 3% employer – could build up a pot of £262,000 by the age of 68.
Someone who began saving at 40 on a salary of £46,400 would need to contribute more to build a similar pot, but could still see a £30,000 boost if they contributed 2% more than the auto-enrolment minimum.
Standard Life warned there is a « constant danger » with pensions as the current minimum pension contributions under auto-enrolment offer a decent start, but not enough for most people to enjoy the kind of retirement they would hope for.
Mike Ambery, retirement savings director at Standard Life, said: « Boosting your pension contributions by even 2% might not seem like a dramatic move now, but over time it could add tens of thousands of pounds to your retirement pot. »
He added: « So don’t betray your future self. If you can, it’s worth giving your pension contributions a boost. After all, when it comes to retirement, you want to be the one walking away with the prize. »
Mr Ambery went on to offer a number of tips on boosting your retirement pot, including by keeping track of any old pensions you might have.
The expert also recommended checking your pension at regular intervals to review how much you are saving, where your money is being invested and if your current pension scheme fits in with your goals.
He added that pensions are a tax-efficient way to save given that the Government adds a boost each time you pay in.
« A £100 contribution could only cost you £80 – or even less if you’re a higher-rate taxpayer – making pensions a tax-efficient way to save, » he said.
Standard Life is part of Phoenix Group and focuses on savings and retirement. Other such businesses are available.
If you have any problems with your workplace pension which your employer won’t or can’t resolve, contact The Pensions Ombudsman online or ring 0800 917 4487.
