Millions of UK workers 'losing £100,000' through simple pension error

Millions of UK workers 'losing £100,000' through simple pension error An Independent Financial Adviser has explained how small changes can end in a big difference Millions of workers could be sacrificing more than £100,000 from their retirement funds by putting off pension contributions or failing to review how much they are saving. Retirement is one of the largest financial commitments most people will face, yet pensions are frequently ignored for decades while households closely monitor mortgages, savings and everyday bills. An illustrative calculation shows that investing £200 a month for 25 years could build a fund of approximately £119,000, assuming annual growth of 5%. Waiting five years before starting the same contributions could therefore create a substantial shortfall because savers lose both the money they would have paid in and years of potential compound growth. Rebecca Robertson, Independent Financial Adviser, planner and director at Evolution Financial Planning, said: “One of the biggest retirement mistakes is assuming you can deal with your pension later. Small decisions made in your 30s, 40s and 50s can have an enormous effect on the lifestyle you can eventually afford. The longer money is invested, the more opportunity it has to benefit from compound growth.” Another common problem is losing track of pensions accumulated through previous employers. Some workers reach their late 50s with several pension pots but no clear understanding of their combined value, how they are invested or the income they might provide. Rebecca said: “Knowing that you have a pension is not the same as having a retirement plan. You need to know how many pensions you hold, what you and your employer are contributing, where the money is invested and whether your projected income is likely to support the retirement you want.” Underestimating the length of retirement can make the problem worse. Somebody stopping work in their 60s may need their savings to provide an income for 25 or 30 years. Inflation also means the amount needed to fund a comfortable lifestyle is unlikely to remain static. Women can be particularly vulnerable to pension shortfalls because career breaks, caring responsibilities and periods of part-time employment can reduce contributions. But Rebecca warns that men may also rely on outdated expectations about retirement ages, investment returns or how far their savings will stretch. She said: “People often assume a good salary means they will automatically have a comfortable retirement, but earnings alone do not create a pension fund. Career breaks and reduced hours can have a lasting effect, so it is important to review the position after any major change in your working life.” Rebecca recommends locating old pensions, checking contribution levels, reviewing investments and ensuring beneficiary nominations remain current. Savers should also obtain forecasts showing what their existing arrangements may provide and compare that with their expected spending. She added: “Retirement planning is not about predicting the future perfectly. It is about using the information available to make better decisions today. “Reviewing your pension now rather than waiting another five years could be worth tens of thousands of pounds and potentially more than £100,000 over a working lifetime. That could ultimately be the difference between choosing when you retire and having retirement chosen for you.”