Need to know
Nearly four in every 10 UK workers are set to fall short of even a basic retirement lifestyle but adding just £25 a month can make a huge difference
Increasing pension contributions by just 1% could boost retirement savings by £23,000 over a typical career, experts have revealed(Image: )
New research highlights that millions of UK workers are currently undersaving for their retirement. Increasing pension contributions by just 1% could significantly transform a person’s financial future and help bridge the looming national savings gap, the experts say.
- Nearly 40% of workers in the UK are currently on track to fall short of even a basic retirement lifestyle. This retirement security crisis is being driven by the rising cost of living and increasing life expectancy across the country, according to HR software provider Personio.
- Increasing your pension contribution by just 1% can boost a final retirement pot by between £13,000 and £23,000 over the span of a typical career. This additional sum is equivalent to the cost of a new car, a year of rent, or several family holidays.
- For an employee on a £30,000 salary, this life-changing 1% increase equates to a monthly cost of only £25. This small adjustment is often less than the price of two takeaway coffees per week (£10), a single meal out (£30-£40) or one streaming service subscription (around £10-£20) .
- Experts suggest that the current minimum auto-enrolment rate of 8% of a worker’s qualifying earnings (comprising 3% employer contribution and 5% from the employee) is frequently insufficient to provide a comfortable life in later years. Relying solely on these baseline figures leaves many individuals facing significant financial shortfalls when they stop working.
- Employees are encouraged to check their current contribution levels and ask if their employer offers a matching scheme for additional payments. Most workplace schemes allow users to update their percentage settings online in just a few minutes to benefit from compound growth.
- Employers who offer more than the legal minimum pension contribution can stand out in a competitive job market. Such investments in a team’s long-term financial security often result in higher levels of staff loyalty and engagement.