Pension savers across the UK are being urged to take action as millions fall into five common traps that could cost them thousands of pounds in retirement. Sam Robinson, Principal Financial Adviser at Almond Financial, has identified these key pitfalls that he says are catching out workers nationwide.
Losing Track of Old Workplace Pensions
The first mistake is losing track of workplace pensions built up with previous employers. "It's incredibly common for people to forget about workplace pensions from old jobs. Over time, these pots can become scattered across multiple providers and people often have no idea how much money they've built up," Robinson said. This can lead to forgotten savings that never get consolidated or optimised.
High Fees Eroding Small Pots
The second pitfall is leaving smaller pension pots sitting in schemes that charge relatively high fees. "Small pension pots with high charges can quietly eat away at your retirement savings over the years," he warned. Even modest fees can compound into significant losses over decades.
Sticking with Minimum Auto-Enrolment Contributions
The third mistake is employees remaining on minimum auto-enrolment contribution levels for their entire working lives without ever reassessing them. "One of the biggest mistakes people make is treating their pension like a fixed bill that never needs revisiting. Even increasing contributions slightly after a pay rise can have a huge long-term impact thanks to compound growth," Mr Robinson explained. Currently, minimum contributions are 8% of qualifying earnings, but many experts recommend saving at least 12-15% for a comfortable retirement.
Missing Out on Employer Match
The fourth error is workers who fail to verify whether they are maximising their employer's contribution matching schemes. Mr Robinson said: "In some workplaces, people are effectively turning down free money by not maximising employer pension contributions. It's always worth checking whether your employer will match higher payments." Many employers offer to match employee contributions up to a certain percentage, effectively doubling the savings.
Ignoring Investment Choices
The fifth and final pitfall involves workers who never examine how their pension is invested after being automatically enrolled into a workplace scheme. "A lot of people are placed into default pension funds and simply leave them untouched for years without checking whether they still suit their goals or stage of life," Robinson said. Default funds may be too conservative or too risky depending on age and risk tolerance.
"People don't need to become pension experts overnight, but regularly checking in on your retirement savings can prevent years of costly mistakes," he said, recommending that those uncertain where to begin should consult an independent financial adviser. The earlier savers engage with their pensions, the more options and flexibility they tend to have later in life.
