Andy Parker, of consultancy Barnett Waddingham, said: “Many pension scheme members never change from this auto-enrolment level. Nevertheless, contributing absolutely the minimum to your pension is unlikely to be the very best approach to make sure you could have a healthy pot for retirement.”
In accordance with data from the Department of Work and Pensions, around 54pc of employees save lower than 6.5pc of their earnings into their pension.
The Government has come under pressure to extend auto-enrolment contributions or increase the scope to incorporate younger employees below the age of twenty-two, to make sure more people have decent retirement income relating to retirement.
There may be one thing worse than saving too little – and that isn’t saving anything in any respect. Evaluation from Barnett Waddingham shows that somebody who delays saving into their pension by just five years will probably be 20pc worse off by the point retirement comes around.
In 2022-23, slightly below 1pc of employees had chosen to stop saving into their pension, in keeping with the most recent data. Young employees are the most probably to come to a decision to opt out of pension contributions – with rising living costs often in charge.
Ms Smith said: “Delaying pension saving can mean a lower retirement income, or having to pay much higher pension contributions in later life. The sooner people start saving in a pension the higher. People is not going to only save longer, but in addition the earliest pension contributions will probably be invested longer, and profit from the magic of compounding, becoming much more beneficial.”
One other common mistake savers make isn’t maximising pension contributions from their employer. Ms Smith said: “Some employer’s match worker’s pension contributions. So if an worker pays more, so does the employer – as much as a limit. That is effectively a pay rise.”
Not considering charges
When you are not any longer contributing to a workplace pension, it’s possible you’ll wonder in the event you could improve returns elsewhere. Also, in the event you’ve worked for a variety of employers throughout your profession, you might end up with quite a few different pension pots.
If that is so, it’s possible you’ll need to take into consideration consolidating your pots right into a non-workplace scheme. Nevertheless, be mindful that your workplace pensions could have lower charges, meaning it’s not all the time value moving the cash.