More than a third of pension savers are ‘winging it’ when it comes to their retirement savings, according to new research from Standard Life.
However, taking a more active approach to retirement saving could make a £95,000 difference over a working lifetime, the research has shown.
The retirement specialist has identified three distinct pension personalities among UK non-retired defined contribution pension savers: wingers, planners and late bloomers.
Wingers are more likely to leave their pension alone and put off thinking about retirement or feel unsure where to start, while planners take a more active approach, such as regularly reviewing their pension or looking for ways to improve their savings. Late bloomers are described as those who may have paid less attention to retirement in the past but are now beginning to take it more seriously.
Standard Life said more than a third (36%) of pension savers are wingers, making it the most common pension personality.
This approach to pension saving is particularly common among younger savers, with 45% of 18-34 years old falling into this category, compared with 35% of those aged 35-54 and 26% of over-55s.
The retirement specialist said almost one in five (18%) never review their pension and only 10% know exactly how much they have saved, while 22% know exactly how much they personally contribute. As a result, just 26% of this cohort feel on track for the retirement they want.
Just under one in three (29%) pension savers are planners, taking a more active role in managing their retirement savings through regular reviews, checking progress and seeking opportunities to improve their outcomes. Men are more likely to be planners than women (35% versus 23%) and planners are also more common among those with private or SIPP pensions (45%).
Standard Life said higher engagement is evident in their understanding of their finances. Almost six in 10 (59%) regularly review their pension, 37% know exactly how much they have saved and almost half (49%) know exactly how much they personally contribute. As a result, more than two thirds (67%) say they feel on track for the retirement they want.
Meanwhile, 25% fall into the late bloomer category. They are most common among Gen X, with 30% of 46-61 year olds falling into this category, compared with 23% of millennials and 20% of Gen Z.
Emma Furlonger, managing director for workplace pensions at Standard Life, said: “Most of us can probably recognise a bit of the winger in ourselves. Retirement can feel a long way off and there are plenty of more immediate demands on our money, so it can be easy to leave a pension ticking away in the background without giving it much thought.
“Of course, few people fit neatly into a single pension personality, and many of us will recognise aspects of several of them at different stages of our lives. But understanding the habits and behaviours that influence how we engage with retirement saving can be a helpful reminder to take stock and check whether we’re doing enough for our future selves.”
Standard Life’s analysis revealed how different approaches could impact total pension savings.
Someone taking a winger-style approach, sticking to minimum auto-enrolment contributions throughout their career, could build a retirement pot of around £252,000 by age 68.
For someone taking a planner-style approach and increasing their employee contribution from 5% to 6%, this figure could rise to £283,000 by age 68, while increasing contributions to 8% could result in a pension pot of around £347,000.
Meanwhile, late bloomers starting with minimum contributions from age 22 and increasing their contributions by 2% at the age of 50 could build a pension pot worth £274,000 by the age of 68.
Furlonger added: “You don’t need to become a pension expert to make a difference. Simply knowing roughly what you’ve saved, checking what you’re paying in and seeing whether you’re on track are all useful places to start.
“Taking small steps to engage with your financial future today can lead to better outcomes later on. Our analysis shows that increasing contributions by even one percentage point early in your career could add thousands of pounds over time.”
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