Millions of Brits could be unknowingly sabotaging their retirement savings by making a series of simple pension mistakes, according to a financial expert.
From forgetting old workplace pensions to failing to increase contributions after pay rises, experts warn workers are “sleepwalking” into retirement shortfalls that could cost them tens, or even hundreds, of thousands of pounds.
Sam Robinson, a Principal Financial Advisor at Almond Financial, has revealed the five biggest pension potholes workers should avoid.
1. Losing track of old pensions
Many workers build up several pension pots throughout their careers and completely lose track of them after changing jobs.
“It’s incredibly common for people to forget about workplace pensions from old jobs. Over time, these pots can become scattered across multiple providers and people often have no idea how much money they’ve built up”, added Robinson.
2. Leaving small pension pots sitting in high-fee schemes
Workers can also lose significant amounts through fees if old pension pots remain in underperforming or expensive schemes.
Sam added, “small pension pots with high charges can quietly eat away at your retirement savings over the years. In some cases, consolidating pensions into a better-value scheme can make managing your retirement savings much easier.”
3. Never increasing contributions
Experts warn many workers stay on minimum auto-enrolment pension contributions for decades without reviewing them.
“One of the biggest mistakes people make is treating their pension like a fixed bill that never needs revisiting. Even increasing contributions slightly after a pay rise can have a huge long-term impact thanks to compound growth.”
4. Missing out on employer pension matches
Some employees also fail to check whether they are taking full advantage of employer contribution schemes.
Robinson said: “In some workplaces, people are effectively turning down free money by not maximising employer pension contributions. It’s always worth checking whether your employer will match higher payments.”
5. Staying in the default pension fund for decades
Many workers never check how their pension is invested after being automatically enrolled into a workplace scheme.
“A lot of people are placed into default pension funds and simply leave them untouched for years without checking whether they still suit their goals or stage of life.
“Reviewing how your pension is invested, especially as you get closer to retirement, can be an important step in making sure your savings are working as hard as possible, he added.
However, Mr Robinson did explain that the earlier people engage with their pension, the more options and flexibility they usually have later in life.
“Small changes made today can have a surprisingly big impact by retirement.”
“People don’t need to become pension experts overnight, but regularly checking in on your retirement savings can prevent years of costly mistakes.
“If you’re not sure where to start, always speak to an independent financial adviser.”
