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The easiest way to retire with more money

Mathilda Volant

by , Team PensionBee

at PensionBee

02 May 2025 /  

Money notes, calculator and magnifying glass.

A pension is one of the most important financial commitments, yet many people hardly think about it. Workplace pensions simplify saving by automatically deducting contributions from eligible employees’ salaries.

Since the 2012 introduction of Auto-Enrolment, the number of people with workplace pensions has doubled. However, this system often leads to a ‘set and forget’ mindset, causing pensions to be neglected for years.

This lack of attention can have a major impact on how much money you’ll have in retirement. Many workers miss out on golden opportunities to increase contributions, combine old pensions, or switch to better-performing funds.

Those who actively manage their pensions, such as higher earners or those with multiple pots, often feel more confident about their financial future. But for most, this disengagement can lead to smaller savings and fewer options later in life.

At PensionBee, we’ve examined the effects of pension disengagement. Our report, The £500,000 Cost of Neglecting your Pension, shows that small, regular adjustments can greatly boost your retirement savings.

By taking action now, you could add up to £500,000 to your pension pot by retirement. Here are six simple things you can do to give yourself the best chance of a comfortable retirement.

1. Don’t opt out of free money

Behavioural Expert and Co-Founder of Shaping Wealth, Neil Bage says: “As humans, we have a really interesting challenge with our ‘present self’ and our ‘future self’. And the future self, it’s a stranger to me. And so, we’ve always as a species had a really difficult time to put ourselves into a future state and make decisions today that will ultimately benefit me in the future.”

Auto-Enrolment has helped millions save for retirement, but opting out can have serious consequences. While most people stay enrolled, opt-out rates tend to rise during economic hardship like the cost-of-living crisis. Career breaks, whether for health, caring for family, or switching to self-employment, can also lead to gaps in saving.

What’s the cost of opting out of your workplace pension?

Contribution gaps No periods of opting out Opted out for 3 years from age 30-33
Pot size 68 £194,185 £176,740
Difference in pot size -£17,445

Assumes a starting salary of £25,000 at age 21, average annual salary increases of 2%, 8% pension contributions when contributing, 3% annual investment growth, 0.7% in annual management charges and no withdrawals over the period.

For instance, taking a three-year break from saving at age 30 could reduce your pension pot by £17,445. Combined with low contributions and starting late, these gaps could leave you nearly £192,000 short by retirement. Regular, consistent saving is key to securing your future.

2. Know what you’re paying in fees

Even small annual management fees can take a toll on your pension growth over time. For example, if fees increase from 0.7% to 1%, your retirement pot could drop from £194,185 to £176,475 by age 68, leading to a loss of £17,711.

What’s the cost of paying higher fees?

Annual fees 0.7% 1%
Pot size 68 £194,185 £176,475
Difference in pot size -£17,711

Assumes a starting salary of £25,000 at age 21, average annual salary increases of 2%, 8% pension contributions from age 21 to 54, 3% annual investment growth and no withdrawals during the period.

While specialised funds that align with personal values or offer better performance often come with higher fees, it’s crucial to carefully consider the balance between costs and potential returns when selecting a fund. Regularly reviewing your pension contributions and understanding the fees involved is key.

3. Keep track of your pension pots

Head of Consumer PR at PensionBee, Laura Dunn-Sims says: “When it comes to my pension, I’m going to have a ‘home pot‘ approach. I’m going to have one pot that I keep throughout my career. Then as I go through all my old pots, I’m just going to move into the home pot. The idea is I should hopefully always have only one to two pensions.”

Many workers may not realise the potential losses from losing track of their pension pots. Research shows that nearly one-in-ten people believe they may have misplaced a pension worth around £10,000.

What’s the cost of losing a £10,000 pension?

Value of lost pot £0 £10,000
Pot size 68 £194,185 £170,641
Difference in pot size -£23,544

Assumes a starting salary of £25,000 at age 21, average annual salary increases of 2%, 8% pension contributions from age 21 to 54, 3% annual investment growth, 0.7% in annual management charges and no withdrawals during the period.

If someone loses a pension of this value at age 30, it could lead to a reduction of £23,544 in their overall savings by the time they retire. If you have multiple jobs, you could be accumulating multiple pension pots throughout your career. Losing sight of these assets can result in significant losses in retirement wealth.

4. Start early to build compound interest

Starting early is just as important. Most people begin saving in their 20s or 30s, but those who start younger have a big advantage. The earlier you save, the more time your money has to grow thanks to compound interest.

What’s the cost of starting a pension at age 30 instead of 21?

Starting contribution age 21 30
Pot size 68 £194,185 £141,101
Difference in pot size -£53,085

Assumes a starting salary of approximately £30,000 at age 30, average annual salary increases of 2%, 8% pension contributions from age 30 to 54, 3% annual investment growth, 0.7% in annual management charges and no withdrawals during the period.

Waiting until age 30 to start saving, instead of beginning at 21, could leave you with £53,085 less by the time you retire. The longer you delay, the harder it becomes to catch up.

5. Make additional pension contributions

Financial Adviser, Money Columnist and Author, Bola Sol says: “Automation is important. So, wherever you can automate money and contributions to your pension. I’d say that’s key. And potentially, if you can add more in manually yourself, maybe set quarterly reminders on top of the automation, that way you have two different sets of reminders.”

Putting money into your workplace pension is vital, but many people stick to the bare minimum. Research shows that fewer than half of private-sector workers contribute more than the required 8% of their earnings, which includes 5% from their own pay and 3% from their employer.

What’s the cost of sticking to the default contribution levels?

Overall contributions rates (% income) 8% 10% 13%
Pot size at 68 £194,185 £242,732 £315,551
Difference in pot size £48,546 £121,366

Assumes a starting salary of £25,000 at age 21, average annual salary increases of 2%, pension contributions from age 21 to 54, 3% annual investment growth, 0.7% in annual management charges and no withdrawals over the period.

Yet, increasing contributions can make a huge difference. For example, someone saving 13% of their income - either by adding more themselves or asking their employer to contribute more - could end up with £121,366 more by retirement compared to someone sticking to 8%.

6. Evaluate your default fund

A recent report from the Financial Conduct Authority (FCA) highlights that over 90% of pension savers stick with their scheme’s default fund. While this may seem like an easy option, these default funds often take a broad approach that might not be the best fit for everyone.

This is especially true for younger savers, who have the advantage of time on their side and can weather market fluctuations. For them, funds that invest more in ‘equities’ (company shares) could lead to significantly better returns over the years. The difference in potential returns can be quite astonishing.

What’s the cost of remaining in a poor-performing fund?

Annual investment growth rate 3% 5% 7%
Pot size at 68 £194,185 £363,996 £697,247
Difference in pot size £169,810 £503,061

Assumes a starting salary of approximately £25,000 at age 21, average annual salary increases of 2%, 8% pension contributions from age 21 to 54, 0.7% in annual management charges and no withdrawals over the period.

The amount of money invested in company shares usually plays a big role in performance. Generally, funds that invest more in company shares tend to grow faster over the long term, thanks to the magic of compound interest. But, company shares are also considered higher risk investments. As savers get closer to retirement, it makes sense to gradually derisk to protect their savings.

But for those just starting out, taking on a bit more risk can open the door to greater growth. That being said, just because a fund has performed well in the past doesn’t mean it’ll continue to do so. Savers should always consider whether a fund aligns with their goals and personal situation before making any investment decisions.

Summary

Proactively managing your pension can make a significant difference in your retirement. By staying engaged and taking steps to optimise your savings, you can ensure a more comfortable and financially secure future.

Remember, the earlier you start and the more actively you manage your contributions and investments, the better prepared you’ll be for the years ahead. Taking control of your pension today can lead to a brighter tomorrow, allowing you to enjoy the retirement you deserve.

Listen to episode 37 of The Pension Confident Podcast as our expert guests share insights into how to overcome disengagement and retire with more money. You can also read the full transcript or watch the episode on YouTube.

Risk warning

As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.

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