A pensions shortfall means your retirement income could fall short by 10 years or more, research shows - but there are at least five moves you can make now to give your savings a boost.
Fidelity International found that more than one in three (35%) Brits aged 50+ are looking at an income shortfall of 10 or more years, based on the average life expectancy.
MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
“With the right planning, longer lives can be a positive reality, but it requires a new mindset and earlier action.”
Despite the shortfalls they’re facing, the research from Fidelity also found over 50s feel surprisingly optimistic about their retirement, with 56% of pre-retirees and 74% of retirees saying they felt positive.
How can I boost my pension pot?
There are five main ways to increase your pension savings:
1. Consolidate your pensions into one
On average, people will have 11 jobs throughout their career, which might mean you could have 11 pension pots by the time you reach your retirement. This is usually not an ideal situation.
Multiple pension pots are easy to lose or forget about. Additionally, each pot will be charging separate fees that eat into your savings. Consolidating a series of smaller pots into one big one can reap significant rewards.
Not only will you be paying less in fees, but you’ll also be benefiting from the power of compounding – where one bigger pot can more easily grow faster than lots of little ones.
Richard Sweetman, senior consultant at pensions consultancy Broadstone, says: “Consolidating into a single scheme before retirement can make your retirement savings easier to track and manage, giving a clearer idea of what your income in retirement is likely to be.
“Consolidating close to, or at the point of, retirement may also be beneficial, allowing access to more cost-effective options to take pension income.”
However, he cautions “it's important to check for any exit charges or lost benefits before transferring”. Also give careful consideration to which investment fund and pension provider to use as the consolidation vehicle.
How to track down old pensions to consolidate them
Samantha Gould, of campaigns at now:pensions, encourages people to 'go through your old paperwork to find the names of your old pension providers and get in touch with them to find out about your savings'.
You can find lost pensions by contacting your old company directly, or using the government’s free Pension Tracing Service.
“Then you can log in and check your accounts and think about how much money your future self might need once you’re retired,” says Gould.
2. Increase your pension contributions
One of the simplest and most effective ways to boost your pension is to increase your regular contributions — even by just a small proportion of your salary.
Over time, this small adjustment can significantly enhance your retirement savings due to compounding, particularly when combined with tax relief and employer contributions.
The earlier you start increasing your contributions the longer they have to grow and boost your pension.
Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, says: “Boosting your contributions every time you get a pay rise or new role is a good way of increasing your overall pension pot.
“Doing it straightaway before you get used to having the extra money in your pocket is the least painful way of doing it.”
Even if you start later, it can provide a significant increase to your final pot.
Standard Life recently calculated that someone who increased their pension contributions by just 3% to a total of 11% (8% employee, 3% employer) from the age of 45 could build up a pot £32,000 bigger than someone who contributed the minimum level through their career, in today’s prices.
Someone who had no pension savings at all until the age of 45 could build up a similar pot to someone who had contributed at minimum level throughout their career by contributing 18% of their salary from 45 until retirement.
Some employers will match a worker’s contributions up to a certain level too, some up to 10%.
Morrisey adds: “This can be a good way of significantly increasing how much goes into your pension without having to pay in much more yourself.”
Directing some or all of a bonus to your pension can also reap big rewards. Sweetman says: “Contributing one-off lump sums, for example from a bonus payment, can help to fill any expected shortfalls in the value of a target pension pot,” he adds.
Only 7% of people make occasional one-off lump sum payments into their pension, according to Standard Life research. However, one-off pension contributions of £1,000 every five years could boost your pension by £23,000 in retirement, the pension firm found.
If you began working on a salary of £25,000 per year and pay the minimum monthly auto-enrolment contributions (5% employee, 3% employer, known as the 8% pension rule) from the age of 22, you could have a total retirement fund of £434,000 by the age of 66.
However, if you were to also top up your pension with nine one-off payments of £500 every five years, from the age of 25 to 65, you could find yourself £11,000 better off in retirement.
Of course, those in a position to contribute more have the potential to amass a larger retirement fund – for example paying in £5,000 every five years, between the ages of 25 to 65, could result in a total pot of £549,000 – £115,000 more than if no additional contributions had been made. (These figures are not adjusted for inflation.)
3. Switch out of your work default fund
Your workplace pension will have put you in its default fund, but that may not be the best performing option for you.
Pension consultancy Barnett Waddingham recently analysed 22 default arrangements governed by defined contribution workplace pension providers in the UK, with performance data as of 31 December 2024. These providers have more than £500 billion of assets, and over 43 million members between them.
It found in the accumulation – or growth – phase of pension scheme member saving, the strongest-performing default fund over the year returned 23.3%. The weakest performer returned 8.9%.
This means the gap between the highest and lowest performers was 14.4% – greater than the 9.7% gap in 2023.
Clare Moffatt, tax and pensions expert at Royal London, says: “Regularly reviewing your pension investments so that they align to your risk appetite is good practice.
“For some younger people who might be 30 or 40 years from retirement, it might make sense to move to a slightly riskier fund.”
Pension providers often change the investment approach used in the default fund, so keeping up to date with these changes, understanding the rationale for the investment strategy and checking it is right for you is important.
“This is especially so at-retirement, where the approaches between providers can be quite different,” Sweetman adds.
4. Choose a cheaper pension or funds
Not all pension funds are created equal when it comes to fees, even among different workplace pension providers.
Many people will have multiple pension pots, often set up when they were with an old employer. While a charge cap of 0.75% applies to the default investment option in auto enrolment workplace pensions today, many pension policies, including older contracts or those set up outside auto-enrolment, may carry higher fees.
Past studies by the Financial Conduct Authority (FCA) have shown that charges on some older pensions, especially smaller accounts, can average around 2%.
Consolidating into the cheapest pension scheme can be a good idea. Figures from investment platform AJ Bell show that someone combining three pensions with charges of 1.5% to 0.75% could boost their pension pot by over £7,000 over ten years or £20,000 over 20 years if they were to switch to a single, lower cost account.
Some actively managed funds also come with high charges that can eat into your returns over time.
Sweetman says: “By choosing lower-cost funds, such as index trackers or passive investment options, you may achieve similar growth potential at a fraction of the cost — leaving more of your money invested and compounding over time.”
However, this is a complex area – some funds do have higher charges but may also have beneficial characteristics, such as diversifying risk or investing in assets with better potential growth. If in doubt, get professional financial advice.
5. Make sure you’re in line for the maximum state pension
The state pension forms a key part of most people's retirement income. To receive the full new state pension – which in 2025/26 is worth £230.25 per week, or £11,973 a year – you typically need 35 qualifying years of National Insurance contributions.
“If you have gaps in your record, it's often possible to top them up through voluntary contributions,” Sweetman points out. “This can be a cost-effective way to boost your guaranteed retirement income, especially if you're self-employed or have had periods out of work."
The cost in 2025/26 to fill in a missing week is £17.75 per week, or £923 per year.
Each extra complete year of National Insurance you buy will give you up to £6.58 more a week (£342.00 a year) in state pension, before any annual increase.
It’s also worth checking to see if you qualified for a benefit that comes with a NI credit at that time, like Child Benefit, Jobseekers Allowance and Universal Credit. If you qualify then you may be able to backdate a claim and receive the National Insurance credits.
If you’re below state pension age, check your state pension forecast to find out if you’ll benefit from paying voluntary contributions. You can also contact the Future Pension Centre.
If you’ve reached state pension age, contact the Pension Service to find out if you’ll benefit from voluntary contributions.
If you’re living or working abroad and you’re over state pension age, or will reach it within six months, then contact the International Pension Centre for advice.
How much should you save in your pension pot?
How much money do you need to retire is a question on everyone’s lips. It depends on individual circumstances, but the Pensions and Lifetime Savings Association (PLSA) has analysed what life in retirement might cost at three different levels; minimum, moderate and comfortable.
These figures are for total expenditure, not income. For many people, the state pension, currently £11,973 a year for those eligible for the full new amount, will be a big contribution to cover their costs. The rest, however, would need to come from private pensions.
Minimum – single £13,400, couple £21,600 (per year)
This will get you all the basics to cover your daily needs, with some money left over for treats. For a single person, this covers spending £55 a week on groceries, £30 a month on food out of the home, and £12 per month on takeaways.
The minimum income level doesn’t allow for a car, but does give £30 per month for two taxi trips, and £180 per year to cover three rail journeys. It also includes a week long UK holiday, basic TV and broadband, plus a streaming service with ads.
Moderate – single £31,700, couple £43,900 (per year)
At this level, a single person gets £56 a week for groceries, £32 per week for food out of the home, and £11 every week on takeaways, plus £106 a month to take others out for a monthly meal.
The moderate income allows a single person to maintain a three year old small car, replaced every seven years, as well as £22 a month on taxis and £104 per year on rail fares. For travel there is a fortnight 3* all inclusive holiday in the Mediterranean and a long weekend off-peak break in the UK to look forward to.
Comfortable – single £43,900, couple £60,600 (per year)
In a comfortable retirement, a single person can keep a small car that they replace every five years, enjoy a fortnight 4* holiday in the Mediterranean with spending money and three long weekend breaks in the UK, plus an extensive bundled broadband and TV subscription.
Shopping budgets also go up a bit too. Pensioners on this budget could spend around £75 a week on food for a single person, £42 a week on food out of the home, £21 a week on takeaways, and £106 a month to take others out for a monthly meal.
What is the maximum pension pot allowed?
“There is no technical limit on how much you can contribute to your pension, but tax relief is only available on contributions up to the annual allowance of £60,000 a year (in the 2025/26 tax year),” says Gould.
Anything above this and you will be subject to income tax through the annual allowance tax charge.
One quirk of the tax system is that you can actually “carry forward” any unused allowance from the three previous tax years and still benefit from tax relief. You can find out if you have any unused allowance via gov.uk.
There used to be a limit on how much you could save into a pension during your life, known as the lifetime allowance. This was completely abolished from 6 April 2024, removing the overall limit for individuals on pension savings that qualify for tax relief.
From 6 April 2024, there has, however, been a limit on the total amount of lump sums and lump sum death benefits that you can receive free from income tax. These are the lump sum allowance and the lump sum and death benefit allowance.
Usually, your lump sum allowance – the amount you can take tax tax-free – is £268,275, but this may be higher if you hold a protected allowance.
Your tax-free lump sum and death benefit allowance – which includes certain lump sums paid on death before age 75 and serious ill-health lump sums paid before age 75 – is £1,073,100, but this may be higher if you hold a protected allowance.
-
MoneyWeek news quiz: How much will a 2026 FIFA World Cup final ticket cost?Quiz The 2026 World Cup, Netflix, and the cost of care all made headlines this week. How closely were you following this week’s top stories?
-
Christopher Harborne: Reform UK donor and crypto billionaireChristopher Harborne came into the spotlight when it emerged he had given £9 million to Nigel Farage's Reform UK. How did he make his millions?
