Supercharge your retirement savings with one-off contributions

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• One-off pension contributions of £1,000 every 5 years could boost your pension by £23,000 in retirement
• This Pension Engagement Season, Standard Life calculations highlight the benefits of topping up your pension savings with one-off contributions throughout the course of your career

People might not think of their pension when they get a generous birthday gift or a bonus, however new analysis from Standard Life, part of Phoenix Group to coincide with this year’s Pension Engagement Season reveals that those who boost their pension savings with one-off contributions every few years could generate thousands more in retirement savings.

Making ad-hoc payments into a pension throughout someone’s working life can go a long way towards building a healthy pot in retirement. Even smaller contributions can end up making a noticeable difference after they’ve had the chance to grow and benefit from compound investment growth.

Standard Life’s analysis finds that those who begin working on a salary of £25,000 per year and pay the minimum monthly auto-enrolment contributions (3% employee, 5% employer) from the age of 22, could have a total retirement fund of £434,000 by the age of 66, not adjusted for inflation. However, those who topped their pensions up with nine one-off payments of £500 every 5 years, from the age of 25 to 65, could find themselves £11,000 better off in retirement. Of course, those in a position to contribute more have the potential to amass a larger retirement fund – for example paying in £5,000 every 5 years, between the ages of 25 to 65, could result in a total pot of £549,000 – £115,000 more than if no additional contributions had been made.

One-off contributions and retirement fund

^{*if beginning working with a salary of £25,000 per year and paying 5% monthly employee contributions and 3% employer contributions into a workplace pension at the age of 22 and assuming 3.5% salary growth per year. Figures are not reduced to take effect of inflation. Annual Management Charge of 1.00% assumed. The figures are an illustration and are not guaranteed. Earning limits not applied.}

It’s always a trade-off as putting money away means there’s less of it to meet short-term costs or luxuries now, but these figures highlight the potential potency for one-off contributions to build up over a long period of time, particularly when possibly benefiting from the power of compounding.

Dean Butler, Managing Director for Retail at Standard Life said: “It’s been a tough couple of years and most people who find themselves with a bit of extra money would probably use it to boost the monthly budget or treat themselves or their families. However, if you choose to put your bonus or birthday gift in your pension you might not have anything show for it immediately, but contributions can provide a certain sense of satisfaction - and have a disproportionate positive impact on your standard of living in retirement. Pensions are one of the most tax-efficient ways to save and they’re investments, so they have the potential to grow faster than cash-based savings would. For example, if you receive a bonus this year, paying some or all of it into your pension plan could shield your money from some big tax and national insurance deductions, meaning you could keep more of your in the long run, whilst also giving your pension savings a significant boost by the time you’re ready to retire.”

“With the ongoing cost of living challenges, it can be tempting to put off thinking about your long-term financial future and focus purely on the short term. However, as our analysis shows, if your finances permit and it’s appropriate for your circumstances, the more you engage with and contribute to your pension, the better your ultimate retirement outcome will be. For those in a position to do so, consistently paying into a pension from as early an age as possible and topping up payments, especially in your 20s, 30s or early 40s, can make a massive difference over time.”

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Notes to editors:

1 Calculations assume the following:

Figures are not reduced to take effect of inflation.

2 - Calculations are intended only for the sole purpose of providing an illustration regarding the projection of savings and pensions. They should not be used with the intention to give an accurate representation of real-world outcomes.

About Standard Life

• Standard Life is a brand that has been trusted to look after peoples' life savings for nearly 200 years
• Today it proudly serves millions of customers who come to Standard Life directly, through advisers and through their employers' pension scheme.
• Standard Life is part of Phoenix Group, the largest long-term savings and retirement business in the UK. We're proud to be building on nearly 200 years of Standard Life heritage together
• Our products include a variety of Pensions, Bonds and Retirement options to suit people's needs, helping our customers to invest and save for their future. We're proud to offer a leading range of sustainable and responsible investment options.
• We support our customers on their journey to and through retirement with comprehensive, easy-to-understand guidance so they can invest in the right way for their needs, and plan a future they feel confident about
• The value of investments can go down as well as up and may be worth less than originally invested.