People choosing to retire two years later than minimum pension age could net an extra £22,000

31.01.2023 - 17:21 / dailyrecord.co.uk

While many people aspire to retire as early in life as possible, the additional savings you can make during the latter years of a career can have a positive impact on the size of your pension pot. New analysis by Standard Life demonstrates how working for an extra couple of years - when a combination of peak earnings, higher pension contributions and compound interest can have a greater impact - could significantly boost your retirement income.

In April 2028 the normal minimum pension age will increase from 55 to 57, meaning you will need to be aged 57 or older before you can start taking money from your pension. This may be unpopular, particularly among workers who will be approaching this age in the next few years, but an additional two years of pension saving could make a notable impact on your total retirement pot.

Standard Life’s analysis suggests that those who begin working on a salary of £25,000 per year and pay the standard monthly auto-enrolment contributions (3% employee, 5% employer) from the age of 22, would build up a total retirement fund of £171,000 by the age of 55. However, retiring just two years later, at the future normal minimum pension age of 57, would result in a total pot of £193,000 - £22,000 more.

The following calculations are for illustration purposes and are not guaranteed pension sums due to the number of variables involved.

These calculations are based on someone starting work at 22 on a salary of £25,000 per year and paying 3 per cent monthly contributions into a workplace pension and assuming 3.5 per cent salary growth per year, and 5 per cent a year investment growth.

Retiring early will mean you miss out on the benefits of continued compound interest towards the end of your career when it