Pension warning: Britons risk missing out on £62,000 for simple mistake

Britons could miss out on £62,000 when they retire if they make a "short-term decision" while working, a pension adviser has warned.

In the UK, workers are automatically enrolled into a workplace pension scheme which helps employees to build up money for when they eventually retire.

Employers are required to contribute the value of at least three per cent of a salary into the scheme, so long as employers pay in the same.

The money helps boost retirement funds by giving Britons extra cash on top of the state pension. However, workers are allowed to opt out of the workplace pension scheme if they choose.

Pete Glancy, the head of policy, pensions and investments at Scottish Widows, warned such a decision would have a "stark" impact.

He said: "Inflationary pressures are always challenging.

"It can be hard for savers to mitigate against them – but thankfully, there are some small ways to safeguard your future finances from today’s rising costs.

"Maintaining regular contributions to a private pension is one of the best tools, as it’s an incredibly tax efficient way to maximise the amount you’ll have in the future, when the time comes to retire.

"Faced with rising costs of living, it can be tempting to cut pension contributions. "However, the impacts of this short-term decision on your future wealth would be stark – particularly for women."

Glancy said that if a 40-year-old single woman chose to permanently reduce her pension contributions by just £1,824 a year due to the cost of living, she would lose out on £62,000 when she retired.

He added: "To help savers at this difficult time, I’d like to see the rules relaxed slightly on employer contributions.

"The situation would be improved by allowing lower paid employees to temporarily alter their employee pension contributions when their financial situation changes – without losing their right to an employer-paid pension contributions.

"Employer pension contributions are effectively deferred pay, and anyone struggling to make ends meet shouldn’t be penalised further down the line for needing to keep hold of more of their money now."