Waiting five years to start saving for retirement could leave people £50,000 worse off when the time comes, analysis from Standard Life found.
The analysis found those who begin working on a salary of £25,000 per year, and pay the minimum monthly auto-enrolment contributions (5 per cent employee and 3 per cent employer) from the age of 22, could have a total retirement fund of £434,000 by the age of 66, not adjusted for inflation.
However, waiting just five years until the age of 27 to start contributing could result in a total pot of £380,000 – £54,000 less.
And waiting another five years would leave someone £106,000 worse off.
Dean Butler, managing director for retail direct at Standard Life said: “It’s remarkable to see how just a five-year delay in saving in your 20s can significantly reduce the pension you retire on by tens of thousands of pounds. At the start of a career and when first earning money it can be tempting to spend as much as possible.
"However, as our analysis shows, if your finances permit and it’s appropriate for your circumstances, the sooner you engage with and begin to contribute to your pension, the better your ultimate retirement outcome could be."
He said it is worth considering the impact on retirement of joining the workforce later, for something like staying in higher education longer.
Butler suggested in this situation it would be beneficial to increase contributions in the future to reach an expected retirement pot.
He also said those who are self-employed should consider opening a personal pension so as not to miss out on early-career contributions.
"Our calculations show that contributing to your pension from the very start of your career can mean the potential investment growth is much more significant and can result in a much larger retirement pot," said Butler.
"For those in a position to do so, consistently paying into a pension from as early an age as possible and topping up payments, especially in your 20s, 30s or early 40s, can make a massive difference over time.
"The longer you wait to start the worse off you could be by the time you stop working, so if you’re able to save into a pension your future self is likely to thank you for it."
tara.o'connor@ft.com
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