Poor pension management could cost UK savers more than £500,000 over their lifetime, according to new research from online pension provider PensionBee.
Further losses of £190,000 could stem from inadequate pension contributions, while poor management decisions might waste an additional £40,000.
The findings highlight how regular engagement with pension savings leads to significantly better retirement outcomes. Over 90 per cent of pension savers remain in default investment funds, which could significantly impact their retirement savings.
PensionBee’s analysis shows that a saver achieving three per cent annual investment growth could accumulate £194,185 by age 68. In contrast, those invested in a fund achieving seven per cent growth could amass £697,247.
This stark difference of £503,061 demonstrates how investment strategy choices can have a profound effect on retirement savings. The research suggests that while default funds offer convenience, they may not maximise potential returns for savers.
Do you have a money story you’d like to share? Get in touch by emailing [email protected].
Britons could see their pension savings cut by around half a million pounds
GETTY
Inadequate pension contributions represent another significant financial risk, with potential losses exceeding £190,000. A saver contributing 13 per cent of qualifying earnings instead of the minimum eight per cent could accumulate an extra £121,366 at retirement.
Opting out of pension contributions for just three years at age 30 could reduce the retirement pot by £17,445. Starting pension contributions at age 30 rather than 21 could result in an even larger shortfall of £53,085.
These figures demonstrate how early and consistent contributions play a crucial role in building retirement wealth. Poor pension management through high fees and lost pension pots can significantly diminish retirement savings.
Annual management fees of one per cent could reduce pension savings by £17,711, compared to paying fees of 0.7 per cent. Losing track of a £10,000 pension pot at age 30 could result in a £23,544 reduction in the final retirement savings.
Experts have issued a warning to pension saver s
PEXELS
These combined factors mean savers could lose over £40,000 through inefficient pension management. The research emphasises how seemingly small differences in management fees and careful tracking of pension pots can have substantial long-term impacts.
PensionBee’s analysis of customers aged 18-54 reveals striking differences based on engagement levels. Customers who logged into the app five or more times monthly held pension values of £31,076 on average.
This was three times greater than those who logged in less frequently, who averaged just £9,614. Customers who switched from default plans to specialised funds showed higher average pension values of £24,604.
Those remaining in default funds held average values of £15,220. Regular users of PensionBee’s Pension Calculator saw their pots grow threefold over six years, compared to doubling for non-users.
Lisa Picardo, Chief Business Officer UK at PensionBee, said: “Engaging with your pension doesn’t 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.”
She emphasised that simple steps like regular pension reviews, consolidating old pots, and increasing contributions when possible can dramatically improve retirement outcomes.
LATEST DEVELOPMENTS:
Britons are looking for the best way to ensure their pension savings go further
GETTY
Picardo added that the pension industry must do more to support customers by simplifying fund information and making it easier to compare options.
PensionBee is calling for significant changes across the pension industry to help savers achieve better outcomes.
The provider emphasises that responsibility doesn’t solely lie with individual savers. The company is advocating for the introduction of a 10-day pension switch guarantee.
It would enable savers to switch more quickly to providers that better align with their needs. The guarantee would also help people move their pensions to providers offering better value for money.
