There could be a shock in store for higher earners – help them plug their pension gaps

Perhaps surprisingly, only 39% of higher earners are on track for a comfortable retirement. That’s £38,662 per year for a single person and £58,480 for a couple, according to our research*.

For the 61% who aren’t on track, there could be a nasty shock waiting when they reach retirement. Because the reality is that they’ll be used to spending a lot more to fund their lifestyle. So, some tough decisions will have to be made unless these higher earners can start plugging the gaps in their private and workplace pensions.

And with only 18% of households overall on track for a comfortable retirement, it’s clear there’s still work to be done. We’ve put together four key tips that can be shared with employees to help them get back on track.

Add a little, gain a lot

Because you can’t normally take money from your pension until age 55 (57 from 2028), it could be easy for pension contributions to fall to the back of your mind. But every time you receive a promotion or pay rise, it’s good to remember that increasing your contributions will boost your pension over time. And if you’re a higher earner, you’ll benefit from tax relief on your contributions of 40%, or even 45%, so it’s a highly tax-efficient way to build your wealth.

If you receive a bonus and can afford to, paying that into your pension can make a huge difference. You’ll save the income tax and National Insurance that would’ve been deducted had you taken your bonus as pay.

You could be getting more

It’s also worth checking whether your employer offers matching contributions. This is where your employer increases their contribution into your pension so long as you do the same. If you have the spare cash, it’s a great way of adding significantly more to your pension without necessarily having to put in much more yourself.

And if your pension is invested, the power of compounding means your pension could grow even more over time.

Remember, investments can go down as well as up in value, so you could get back less than you invest.

Plan ahead

It’s good to think about when and where you’d like to retire. If you know what you want your retirement to look like, you can work out how much it’s likely to cost. It’s a hugely personal thing and will look different to everyone.

Once you know the income you’re aiming for, it’s good to use a pension calculator to see how much you need to be saving into your pension to achieve your desired income.

Try our pension calculator

And don’t forget to consider your State Pension – you can request a free forecast to see what you’re due to receive.

Find any lost pots

As many as 1 in 20 people could have lost or forgotten pensions. That’s an estimated £26.6bn just waiting to be claimed. So tracking down any lost pensions could add thousands of pounds to your retirement savings.

You can start by looking for old pension statements from previous employers, or old payslips for any signs of pension deductions. If you can’t find clear information in any paperwork, get in touch with old employers. Confirm when you worked for them and ask for the name and contact details of the pension provider at the time.

If you need a helping hand, try the government’s free pension tracing service.

If you do find any old pensions, it’s worth considering consolidation. Bringing your pensions together means you’ll have a single view of your retirement savings, with reduced admin and less chance of losing track again.

But it’s important to check about any exit fees or if you’ll lose out on any benefits or guarantees. And remember to compare the services and fees of both providers, to make sure transferring is right for you.

This article isn’t personal advice. If you’re not sure what’s right for you, please ask about financial advice.

We offer a workplace savings platform that caters for employees at every life stage. This includes easy access to a Group SIPP, payroll-enabled ISA and Fund and Share accounts, all fully supported by our tailored financial wellbeing programmes. We also offer Active Savings (cash deposits), a Lifetime ISA and Junior ISAs, all accessed via our user-friendly app.

*HL Savings and Resilience Barometer, July 2024.

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