Someone working part-time, three days a week, will find themselves with a much lower pension fund than if they had worked full time.
Standard Life said a saver on a salary of £25,000 per year paying in the minimum amount to their pension would have a retirement fund totalling £210,000 by the time they are 68.
Many employees, particularly women, go part time when they start a family, which is when their pension contributions take a bit hit.
By switching to part-time, or three days a week, at 35, they will have instead saved only £152,000 by the age of 68; £58,000 less than if they remained working full-time.
Standard Life is urging savers to make sure they pay 13 per cent into their pension when working part time.
Dean Butler, managing director for Retail Direct at Standard Life, part of Phoenix Group said: “Whether personal choice or not, part-time work is a good option for many and can help to balance an income with other responsibilities or interests.
“Whilst it isn’t always strictly a financial decision, going part-time does have an immediate impact on short-term finances as well as a long-term impact on retirement if you continue saving at the same level but with a lower salary to contribute from.”
“It won’t always be possible, but if you can, increasing your pension contributions when you make the move to part-time work could go some way towards, or completely fill the gap.”
How to increase your pension:
Find out what you need:
Butler urges savers to use the Retirement Living Standards tool from the Pensions and Lifetime Savings Association. This can help you calculate what you would need to fund a minimum, moderate and comfortable lifestyle. “This will help you determine whether you’re on track to meet the savings required, and make any adjustments to your finances if not.”
Track down old pensions:
You may want to check with past employers and find out where any lost or old pensions are. If you think you have old pensions but don’t know how to find them, use the government’s free Pension Tracing Service.
Make extra payments
If you have a personal pension or a workplace pension, you can make extra contributions. In the tax year 2024/25 the tax-free annual limit is 100% of your salary or £60,000 (whichever is lower). This includes both contributions paid by you and contributions paid by your employer. Just remember that, if you put more than this into your pension, you won’t receive tax relief on any amount over the contribution limit.
Carry it forward
If you’d like to exceed the allowance in a given year you may be able to increase your tax-free contributions by using the ‘carry forward‘ rule. This enables you to make the most of any unused allowance from the previous three years. So if you haven’t used all of your recent allowances, you could use them to top up your pension in the current tax year.
