Employees who fail to actively engage with their pension during their career could see this cost them up to £500,000 in retirement, according to research by online pensions provider PensionBee.
It found that more than 90% of pension saver respondents remain in default funds, which may not maximise returns. While a saver achieving 3% annual investment growth could accumulate £194,185 by age 68, those achieving 7% growth could amass £697,247, a £503,061 difference.
It also found that a saver contributing 13% of their qualifying earnings instead of the 8% minimum, which consists of 5% personal contribution and 3% employer contribution, could accumulate an extra £121,366.
Meanwhile, those who opt out of pension contributions for three years at the age of 30 could reduce their retirement pot by £17,445. Employees who delay starting to contribute until the age of 30, instead of 21, could end up with a £53,085 shortfall.
Among pension savers aged 18-54, in the accumulation phase of retirement saving, those who elected to switch from the default plan to more specialised funds held higher average pension values, at £24,604, compared to those remaining in the default fund, at £15,220.
The report also highlighted that paying annual fees of 1% could shrink pension savings by £17,711, compared to fees of 0.7%, while losing a £10,000 pension pot at the age of 30 could reduce an employee’s final pot by £23,544.
Lisa Picardo, chief business officer UK at PensionBee, said: “Engaging with your pension does not have to be overwhelming. Many people put it off until retirement is near, by which time changing the outcome is much harder. But our research shows that small, early actions can make a profound difference. Simple steps such as regularly reviewing a pension, consolidating old pots, and increasing contributions when possible can dramatically improve retirement outcomes.
“Government action is also key to empowering savers to build the retirement they deserve. Introducing a 10-day pension switch guarantee would eliminate unnecessary delays, facilitate timely decisions, and allow savers to switch to providers that are more aligned with their individual needs or that offer better value for money.”
