IT’S UNWISE TO OPT OUT OF PENSION

It’s tough to keep on top of our bills at the moment but ditching pension contributions, even just for a few years, could leave a huge dent in your savings.

A short three-year pension contribution break could result in £36,000 less in your retirement pot, new analysis from Standard Life reveals.

Someone who began work at the age of 22 in 2020 with a salary of £25,000 per year, paying the standard monthly auto-enrolment contributions (5% employee, 3% employer), could amass a total retirement fund of around £459,000 by the age of 66. That’s assuming 5% investment growth and a 0.75% investment charge.

However, opting out of pension contributions for three years at the start of their career could result in a total pot of £423,000 – a hefty £36,000 less.

Opting out of autoenrolment and their workplace pension for a longer period would have an even bigger impact.

Opting out for six years would mean £71,000 less and nine years would reduce their pot by a huge £105,000.

Gail Izat, managing director for workplace at Standard Life, said: “Households have had a great deal to contend with over the past three years, with many having to cut back on spending and saving as a result.

“While cutting back on longterm saving might seem like the least harmful of a bunch of bad options, particularly earlier in life, it could result in people missing out on tens of thousands of pounds in retirement.

“If you’ve opted out in recent years, when circumstances allow remember your pension. Your future self may well thank you.”