Workers could boost their retirement savings by £23,000 thanks to a pension hack, according to new research carried out by Standard Life.
The firm is highlighting how those who bolster their pension savings with one-off contributions every few years could generate thousands more in retirement savings.
Standard Life’s analysis found that those who begin working on a salary of £25,000 per year and pay the minimum monthly auto-enrolment contributions from the age of 22, could have a total retirement fund of £434,000 by the age of 66, not adjusted for inflation.
In comparison, an individual who contributed to their pensions with nine one-off payments worth £500 every five years from the age of 25 to 65 could see themselves £11,000 better off.
If someone tops up their pension by £1,000 every five years, this would result in an extra £23,000 in their pot.
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According to Standard Life, if someone were to contribute £5,000 every five years from the age of 25 to retirement, they would have a pension savings pot worth £549,000.
Dean Butler, the managing director for Retail at Standard Life, broke down why people should consider this useful hack.
He explained: “It’s been a tough couple of years and most people who find themselves with a bit of extra money would probably use it to boost the monthly budget or treat themselves or their families.
“However, if you choose to put your bonus or birthday gift in your pension you might not have anything to show for it immediately, but contributions can provide a certain sense of satisfaction.
“Pensions are one of the most tax-efficient ways to save and they’re investments, so they have the potential to grow faster than cash-based savings would.”
The pension expert gave the example if someone receives a bonus this year and pay some or all of it into their retirement plan which could shield their money from tax and National Insurance deductions.
For example, if you receive a bonus this year, paying some or all of it into your pension plan could shield your money from some big tax and national insurance deductions.
This means that future retirees will more of their hard-earned cash and give their pension savings a sizable boost.
Mr Butler added: “With the ongoing cost of living challenges, it can be tempting to put off thinking about your long-term financial future and focus purely on the short term.
“However, as our analysis shows, if your finances permit and it’s appropriate for your circumstances, the more you engage with and contribute to your pension, the better your ultimate retirement outcome will be.
“For those in a position to do so, consistently paying into a pension from as early an age as possible and topping up payments, especially in your 20s, 30s or early 40s, can make a massive difference over time.”
