Three pension changes that could add £243,200 to your retirement fund

Small tweaks to your pension could potentially add £243,200 to your retirement fund if you're earning just below the average UK salary, according to personal finance experts at Interactive Investor. They've shared three key steps to bolster your wealth for your golden years.

Their first tip is to consider switching jobs to an employer who contributes more than the minimum 3% to your workplace pension scheme. For someone earning £35,000, moving to an employer offering a 5% employer pension contribution could amass an extra £116,700 by the time they retire.

As of April 2024, the average salary for a full-time worker was £37,430.

The second piece of advice is to make the most of salary sacrifice schemes and reinvest the tax saving. Salary sacrifice is an agreement where you agree to reduce your cash pay entitlement, usually in exchange for a non-cash benefit like pension contributions.

Interactive Investor points out that basic-rate taxpayers save £8 in National Insurance for every £100 they contribute to their pension, while higher-rate taxpayers save £2 for every £100 they contribute, as reported by .

They estimate that an individual earning £35,000, contributing 5% of their salary to their workplace pension and redirecting the £12 monthly National Insurance saving to their pension - either a workplace scheme or a SIPP - could boost their pot by £27,600 over 40 years.

Stowing away an extra £50 each month into your pension following a salary bump could see your retirement kitty swell by a staggering £98,900 over 40 years. This potential windfall banks on the premise of a 5% annual investment growth and yearly contributions escalating by 2%.

For those paying the basic tax rate, this £50 top-up effectively sets you back just £40 due to tax relief. Higher-rate taxpayers fork out even less - only £30, while additional-rate taxpayers contribute a mere £27.50.

Three shrewd financial moves could significantly amplify one's nest egg across various income brackets. A salary of £35,000 could yield an additional £243,200 for your golden years, while a £60,000 income might stack up an extra £312,400.

Those earning £100,000 have the chance to elevate their pension value by a handsome £454,800, considering a steadfast method over four decades with an assumed 5% yearly investment increase net of charges.

Camilla Esmund from Interactive Investor said: "It's encouraging that you don't need to be a high earner to add substantial sums to your pension with some modest tweaks. Taking simple steps like filling in salary sacrifice forms or checking employer contributions when you move jobs could boost your pension significantly over your working life."

She highlighted that state pensions fall short of providing a plush retirement, remarking: "Although the state pension has improved in recent years, it still isn't enough for a comfortable retirement. So, taking steps now to boost your workplace pension is vital to get your retirement savings on track."

She pointed out the importance of understanding one's pension when changing jobs, stating: "Not everyone is in a position to move jobs, but when the time comes, it's vital to find out more about the pension. It forms a crucial part of your pay package and varies significantly between employers - some pay in just 3% while others pay up to 15%. Over years of work that could add thousands to your pension wealth and make the difference between a basic and more comfortable retirement."

The expert also encouraged topping up pensions with a SIPP for a more substantial retirement fund: "If you want to top up your pension, then using a SIPP alongside your workplace pension can be a great way to build retirement wealth. A SIPP allows you to tweak your contributions each month, which is really useful if you have some more expensive months and want to vary the amount you pay in."

Adding advice from Craig Rickman, personal finance guru at interactive investor: "Salary sacrifice is a great and simple way for all workers, but particularly those on low to modest incomes, to improve their future financial security at no extra cost.

"Unlike tax relief, salary sacrifice is a better deal for lower earners because they can save 8% NI on pension contributions. This saving comes on top of 20% tax relief, meaning it costs just £72 to pay £100 into their pension. In contrast, higher-rate taxpayers save just 2% NI on pension contributions due to the lower rate for earnings over £50,270. By adding this tax saving into your workplace pension or a SIPP, basic-rate taxpayers could deliver a meaningful boost their pension wealth."