Starting your pension five years late can cost you £40,000 Find out how to make it right

Individuals who delayed their pension savings for five years when they first began working may find that their retirement income is -40k less

Can you correct your youth's mistakes?

Because auto-enrollment rules automatically opt you into your workplace scheme to ensure you are saving for retirement, people who start working today are more likely to save into a pension. Despite the option to opt out, 88% of workers remain in their program.

It was not automatic to join your pension plan if you started working before 2012, and you might not have received the same encouragement. You would have either missed out on something or put off saving for retirement if you had forgotten to sign up.

According to research from financial services firm Standard Life, people who put off joining their plan may end up with a deficit of tens of thousands of pounds when they finally quit working.

According to its analysis, delaying by just five years can make your retirement situation worse by 40,000, while delaying by ten years can make it worse by 74,000. If you put off paying for your pension until you are in your forties, which is about 20 years after people usually start working, you may end up with a staggering 127,700 less.

Starting a pension five years late effectively robs you of more than a year's worth of retirement funds, as the most recent statistics from the Pension and Lifetime Savings Association show that a moderate retirement now costs a single person 31,700 annually.

You basically lose out on four years' worth of retirement savings if you begin your pension in your forties, about twenty years after it should have begun.

Dean Butler, Standard Life's managing director for retail direct, stated, "Our calculations show that contributing to your pension from the very start of your career maximises the potential compound investment growth and can result in a much larger retirement pot."

"For those who can afford it, making regular pension contributions from a young age and increasing them over timeparticularly in your 20s, 30s, or early 40scan have a significant impact.

What is the cost of delaying pension savings?

By the time they reach 68, the state pension age for people born on or after April 6, 1978, Standard Life's calculations indicate how much a typical saver could have in their pension pot.

For these calculations, an employee who starts at age 22 with a starting salary of £25,000 and a yearly wage growth rate of 3 to 5 percent is assumed.

Additionally, standard pension contribution amounts have been assumed, which include a 075% annual management charge, a 5 percent annual investment growth, and a 5 percent employee and 3 percent employer contribution. The numbers take inflation of 2% into consideration.

The numbers demonstrate the negative effects of delaying retirement savings.

Naturally, not everyone's career progresses in a straight line, so there may be other times in life when your pension is overlooked.

This may include times when you worked for yourself and weren't covered by auto-enrollment; for more information, see our in-person article on the advantages of creating a personal pension while working for yourself.

A break in your career can also have a negative impact on your retirement savings. Barnett Waddingham, a consulting firm, found that taking a two-year career break could result in a decrease of £25,600 in your pension.

Fortunately, there are things savers can do to help close the gap.

How to increase your pension in later life.

There are things you can do to lessen the amount of the deficit if you started saving later in life or have gaps in your pension contributions.

Opting back in is the first thing you should do if you are employed but have chosen to leave your workplace program. You will then be eligible for pension tax relief on the funds you contribute to your pension as well as valuable employer contributions. Employees who have previously opted out of their pension plan are reenrolled once every three years in accordance with auto-enrollment regulations. If they still do not want to be a member, they will have to once more actively opt out. If you work for yourself and haven't established a personal pension yet, do so right now. It's better to start out small than to invest nothing at all. Establishing a direct debit ensures that you won't forget. Increasing your pension contributions above the standard minimum (5 percent employee, 3 percent employer) could help you make up for lost time in your youth if you are currently enrolled in a workplace pension. In order to help you have a comfortable retirement, retirement savings expert Scottish Widows advises putting 1215 percent of your pay into your pension. This comprises tax relief, employer contributions, and your own contributions. Salary sacrifice is an additional tax-efficient choice to think about. Verify that the fees you are paying are reasonable. The current cap on workplace pension fees is 0.75%; however, older funds may have higher fees, so it's crucial to verify what you're paying. Don't forget to take into account not only the price alone, but also the investment offering and customer service. Examine your investment portfolio. Because stocks have a higher risk-return profile than less volatile assets like bonds, younger savers can afford to be more exposed to them. Be careful not to de-risk too soon if you still have a long investment horizon. One particularly effective strategy is to increase your pension contributions.

After entering some data into the Scottish Widows pension calculator, we discovered that a 32-year-old who makes 35,000 a year could increase their pension by 97,600 by the time they turn 68 by merely raising their total pension contributions from 8% to 12% (including payroll contributions).

This number is based on the assumptions of 5% annual investment growth, 2% annual inflation, and 3% to 5% annual wage growth.