Six life choices that could cost you £300,000 in retirement savings

04 April 2025

We all know that planning for retirement is important, but new research reveals how certain life events could take a much bigger toll on your pension pot than you might expect. 

The Institute and Faculty of Actuaries’ (IFoA) new report ‘How much could you lose?’, highlightssix key life choices that could slash your retirement savings - by as much as £300,000.

With the cost-of-living crisis continuing to put pressure on many pensioners, it's more important than ever to be aware of these hidden financial pitfalls.

Here are the six major choices that could hit your pension hard:

• Ten year delay in saving for a pension. This could cost you up to £300,000 in lost savings.

• Opting out of a workplace pension for 5 years. Could reduce your pot by around £100,000.

• Missing employer contributions over 40 years. Potentially another £100,000 lost.

• Taking six months of maternity leave. Might reduce savings by £30,000 if contributions are frozen.

• Divorce. The IFoA had previously said that divorcing women lost an average of £30,000 in retirement income.

• Switching from full-time to part-time work. Could cut your pension by £200,000.

Alexandra Miles, of the IFoA Pensions Gap working party, said: “Exploring some of the hurdles that people face when wanting to save for their retirement, through assimilating proper data and research, from a number of different fields and experts is key to building a case for change.

Auto-enrolment and pension reforms

But it’s not just personal choices affecting retirement savings. The IFoA is calling for changes to pension rules, including reviewing the minimum auto-enrolment contribution rate. 

Currently, workers and employers contribute a combined 8% of earnings, but the IFoA warns this may not be enough for many people to maintain the lifestyle they expect in retirement.

The report also pointed to promising pension reforms, including pensions dashboards, which aim to give people a clearer view of their retirement savings, and new pension designs like Collective Defined Contribution (CDC) schemes. 

The IFoA urged the government to look at how other countries tackle pension fairness and sustainability.

President of the IFoA, Kartina Tahir Thomson, warned that many people don’t realise the long-term consequences of these financial choices. She said: “When we are making some of the biggest decisions in our lives, it is worrying that so much is at stake.

"On top of this, many people are unaware of the hidden costs of their decisions that may not impact them until years later, during what could be considered the most vulnerable years of their life.”

Source

IFoA report: Six things that could hit pension pots by £100,000 or more. FT Adviser. Accessed 20 March 2025.