• Pausing pension contributions even for a short period could have big consequences
  • A 3-year pension payment break at the start of your career could mean £36k less in retirement – with those who put off pension saving for longer missing out further

Over the past three years the Covid-19 pandemic, inflation and rapidly rising interest rates have taken their toll on households and had a significant impact on finances, with many people understandably having to focus on making ends meet in the short term rather than the future. While these unprecedented pressures have made saving a huge challenge for many people, analysis from Standard Life, part of Phoenix Group shows the big impact even a short contribution break can have on overall retirement pots.

Opting out of pension contributions mean savers miss out on thousands in future

The relatively small number of people who were auto-enrolled and chose to opt out of their workplace pensions during the Covid pandemic will be at or reaching the three year point where they will begin to be automatically re-enrolled in their scheme. However, during the period of opting out, they may have missed out on significant pension savings.

For example, someone that began working with a salary of £25,000 per year in 2020 and paid the standard monthly auto-enrolment contributions (5% employee, 3% employer) from the age of 22, could amass a total retirement fund of £459,000 at the age of 66, not adjusted for inflation. However, opting out of pension contributions for three years at the start of their career, could result in a total pot of £423,000 – £36,000 less than if they had not stopped paying in. Opting out of auto-enrolment and their workplace pension for a longer period could have an even bigger impact:

Total retirement fund at age of 66*
No breaks or reductions in contributions Opting out of pension contributions for 3 years from the age of 22 Opting out of pension contributions for 6 years from the age of 22 Opting out of pension contributions for 9 years from the age of 22
£459,000 £423,000 £388,000 £354,000
  -£36,000 -£71,000 -£105,000

*if beginning working with a salary of £25,000 per year and paying 3% employer and 5% employee monthly contributions into a workplace pension at the age of 22, assuming 5% investment growth, 3.50% salary growth and a 0.75% investment charge

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 long-term 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.”


James Ikin
07825 191308

James Merrick
Standard Life
07974 063067

Notes to Editors

1 - Calculations assume the following

Starting Salary £25,000
Starting Age 22
Employer Contribution 5.00%
Employee Contribution 3.00%
Investment Growth 5.00%
Salary Growth 3.50%
Annual Investment Cost 0.75%

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 the 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.

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