Three pension tweaks could add up to £243,200 to your retirement savings

Average earners could boost their retirement savings by up to £243,200 through three simple changes, a new analysis suggests. Despite the full new state pension increasing by £470 to £11,973 per year, it still falls short of what is needed for a comfortable retirement, prompting a call for individuals to take a more active role in building their personal pension pots.

According to interactive investor, the combined financial benefit of three strategies could make a significant difference - worth hundreds of thousands of pounds - over a working life. Camilla Esmund, senior manager at interactive investor, said: “Although the state pension has improved in recent years, it still isn’t enough for a comfortable retirement. So, taking steps now to boost your workplace pension is vital to get your retirement savings on track.”

Moving to an employer that contributes 5% instead of the minimum 3% to a workplace pension could boost retirement savings by £116,700 for someone earning £35,000. The gains are even greater for higher earners — up to £328,200 for those on £100,000.

Interactive Investor’s calculations assume 5% investment growth net of fees and that contributions rise 2% per year in line with expected wage inflation.

Taking advantage of salary sacrifice, which reduces both income tax and National Insurance contributions, and reinvesting those savings into a pension could grow a pot by up to £27,600 over 40 years.

Ms Esmund said: “Salary sacrifice is one of the simplest ways to put more money in your pocket at no extra cost. It works by you giving up some of your pay in exchange for a pension contribution.”

Redirecting £50 of a monthly pay rise into a pension could generate £98,900 in retirement savings over four decades, assuming 5% annual investment growth.

Ms Esmund said: “It’s encouraging that you don’t need to be a high earner to add substantial sums to your pension with some modest tweaks. Taking simple steps like filling in salary sacrifice forms or checking employer contributions when you move jobs could boost your pension significantly over your working life.”

The platform also urges pension savers to review their investment fees, warning that high or unclear charges can erode savings over time. Ms Esmund said: “One of the key ways investors can boost their retirement savings is by checking how much they are paying in fees and to make sure they are not overpaying.

"It can be disheartening to integrate good habits, stick to your investment strategy for the long term and see the fruits of compounding take effect over time, only for your growing pot to be eaten away in unnecessary fees. Over decades, the differences can add up to tens of thousands of pounds. Importantly, paying over the odds means less wealth for you to enjoy down the line."

To assist, the platform has launched a comparison tool to help users better understand what they’re paying.

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