Not keeping an eye on your pension can cost you thousands in retirement

17 March 2025

If you have money in a pension scheme, are you engaging regularly with it? If you assume your scheme is doing all the heavy lifting, it might be worth a check. 

New research from online pension provider PensionBee suggests that failing to engage with your pension could cost you dearly—potentially over £500,000 by the time you retire. 

The report highlights three main ways that pension disengagement can significantly reduce your retirement savings:

1. Sticking with the default investment fund

Over 90% of pension savers stay in their provider's default investment fund, which may not offer the best potential returns. Although there is always an element of risk with investment, PensionBee provide a useful illustration of the potential outcome of improved fund growth.

Their analysis looked at someone who could retire at 68 with around £194,000 by achieving 3% annual investment growth. If they were in a higher-growth fund earning 7% per year they could retire with nearly £700,000. That’s a difference of over £500,000 just from making a more strategic investment choice.

2. Contributing the bare minimum

Many people pay only the minimum into their workplace pension, which could mean missing out on substantial savings. A worker who contributes 13% of their qualifying earnings (instead of the standard 8%) could end up with an extra £121,366 in their pension pot, PensionBee say. Also, delaying contributions until 30 instead of starting at 21 could result in a £53,000 shortfall.

3. High fees and lost pensions

Paying excessive fees and losing track of old pensions can also eat into your retirement savings. For example, a pension with a 1% annual management fee could reduce your savings by nearly £18,000 compared to a fund charging 0.7%. If you forget about a £10,000 pension pot from an old job at age 30, you could be missing out on an extra £23,500 by retirement.

Small steps can lead to a big difference

The good news is that PensionBee's data shows that actively managing your pension can significantly improve your retirement outcome:

• Log in regularly. Pension savers who checked their accounts at least five times a month had, on average, pension pots worth three times more (£31,076) than those who rarely logged in (£9,614).

• Choose your investments wisely. Those who switched out of their default fund had average pension savings of £24,604 compared to £15,220 for those who stayed put.

• Use pension planning tools. People who used PensionBee's pension calculator saw their pension pots triple in six years, compared to doubling for those who didn’t use the tool.

Lisa Picardo, Chief Business Officer at PensionBee, urges people to take an active role in their pensions before it’s too late. She comments: “Engaging with your pension doesn’t have to be overwhelming. Many people put it off until retirement is near, by which time changing the outcome is much harder. But our research shows that small, early actions can make a profound difference.

“Simple steps such as regularly reviewing your pension, consolidating old pots, and increasing contributions when possible can dramatically improve retirement outcomes.”

The important takeaway from these findings is that the sooner you take control of your pension, the better your financial future will look. 

Regularly checking in, reviewing your investment choices, and ensuring you’re making the most of your contributions could mean the difference between just getting by and enjoying a comfortable retirement.

If you’ve been ignoring your pension, now is the time to start paying attention.

Source:

Failing to engage with your pension could cost you over £500,000 by the time you retire: Pension disengagement could cost you up to £500,000 in retirement. Pension Bee. Accessed 11 March 2025