Increasing pension contributions can add £124k to pot, interactive investor finds

Upping investment or pension contributions in line with inflation can increase the size of saving pots by up to £124,000 over 40 years, interactive investor has found.

According to Office for National Statistics (ONS) data, the average wage rose by 5.6% this year, meaning that that average full time UK worker on around £35,000 enjoyed a pay rise of nearly £2,000.

Alongside rising wages, interactive investor said that "there is finally light at the end of the tunnel" as inflation fell to 3.4% in February.

With many Britons receiving a pay rise ahead of the new tax year, calculations show the impact of upping investment contributions with inflation, over a long period, compared to keeping contributions at the same level.

interactive investor found that a pension saver contributing £250 a month (£200 contribution plus £50 tax relief) could end up with around £124,000 more pension wealth by retirement due to upping their pension contributions by 2% each year.

Likewise, an investor making regular monthly contributions of £200 outside their pension could end up with around almost £100,000 more after 40 years if they increase their contributions by 2%, assuming annual pay rise is in line with the target inflation level each year.

Head of pensions and savings at interactive investor, Alice Guy, said: "With many Britons enjoying pay rises this year, the new tax year is a great time to think about upping your regular investments or pension contributions. You can give your future self a massive pay rise by keeping an eye on your regular investments and inching them upwards over time. In contrast, the cost of not increasing your contributions can have a big impact on your future wealth, meaning you contribute less and less in real terms as time goes by.

"Many people with workplace pensions will see their contributions increase automatically if they get a pay rise as their contributions are based on a percentage of their salary. But that’s not the case for self-employed workers or those who are saving extra pension contributions into another pension like a SIPP. And even if you have a workplace pension it’s worth thinking about upping your contributions if you can afford it as the minimum contributions often aren’t enough for a comfortable retirement."



Share Story:

Recent Stories


FREE E-NEWS SIGN UP

Subscribe to our newsletter to receive breaking news and other industry announcements by email.

  Please tick here to confirm you are happy to receive third party promotions from carefully selected partners.


Helping the credit challenged get mortgage ready
A rising number of borrowers are finding it harder to access mortgages due to being credit challenged - whether that’s from historic debts, a county court judgment, or having little to no credit history.

In the latest episode of the Mortgage Insider podcast, Phil Spencer is joined by Eloise Hall, Head of National Accounts at Kensington Mortgages, and Alastair Douglas, CEO of TotallyMoney.


Inside the world of high net worth lending
The mortgage market continues to evolve, and so too does the answer to the question: what is a high net worth individual in today’s market? In this episode of the Mortgage Insider podcast, host Phil Spencer is joined by Stephen Moroukian, Head of Product and Proposition for Real Estate Financing at Barclays Private Bank, and Islay Robinson, founder and CEO of Enness Global. Together, they explore what brokers really need to know when supporting high net worth individuals.

The future of the bridging industry and the Autumn Budget
MoneyAge content editor, Dan McGrath, is joined by head of marketing at Black & White Bridging, Matt Horton, to discuss the bridging industry, the impact of the Autumn Budget and what the future holds for the sector.