Important information - the value of investments and the income from them, can go down as well as up, so you may get back less than you invest.

You might be surprised how much difference small amounts saved today can make to your future finances. 

That’s particularly true when it comes to saving for retirement, when you may have many years - or even decades - to go before you’ll need the money. Nothing is certain when it comes to investing, but history suggests that money saved and invested into assets such as shares can achieve returns that beat inflation and add substantially to your savings overall. 

Here we model some examples of the difference that adding small extra amounts to your retirement saving can make to the retirement fund you can achieve. Plus, we’ll run through how bringing all your pensions together in one place will help you do it. 

The difference adding 1% can make

We wanted to see how much it might be possible to build by saving 5% of your earnings into a pension. Then, the difference you can make by adding an extra 1% and 2% of earnings to that amount. 

We imagine a person earning an annual salary before tax of £60,000. If they saved 5% of their salary into a pension they would be setting aside £250 a month towards their retirement - the blue line you can see on the chart below. This money we assume will then rise with investment returns of 5% after all fees. 

Then we modelled the effect of adding a further 1% of salary - a total of 6% of salary - and 2% - a total of 7% of salary - towards savings to see what difference this would make after 30 years of saving for their retirement.

You can see from the chart that adding an extra 1% raises the total saved after 30 years from around £208,000 to almost £250,000 - a rise of more than 20%. Adding an extra 2% builds a pot of more than £291,000 - a rise of almost 40%. 

Get your pensions under control will help you hit your targets 

By taking control of your pension savings inside a SIPP - a Self-Invested Personal Pension - you can improve your saving habits with the aim of building a bigger fund to live from in retirement. If you find your retirement savings are split across several different workplace pensions from previous periods of employment, it can make sense to bring them together inside a SIPP. Here you’ll be able to more easily see what you have saved, the investment return you’re achieving and then add to the amounts your saving if that’s necessary.  

You’ll also receive £200 to £2,000 cashback, as a thank you from us, if you apply to transfer any pensions, ISAs or other investments by 1 April 2024. Exclusions, T&Cs apply

In our example above, adding 1% extra of salary would require an extra £50 a month be paid into a SIPP. 2% would require a further £100. Making those changes inside a SIPP is easy using a Regular Savings Plan. Once it’s set up you can easily tweak the amounts you’re saving each month. 

And because pension contributions benefit from tax relief, it may not cost you as much as you think to add these amounts. The tax relief you get is based on your level of earnings. You can read more about pension tax relief here

Tax relief up to the 20% basic rate of income tax is added automatically, which means that it would cost you £40 to see £50 added to your SIPP. The remaining 20% of tax relief available to higher rate taxpayers can be obtained via self-assessment, either as a cash payment back to you or via a change in your tax code is subsequent years. 

See if consolidating pensions is right for you 

Consolidating pensions can help you engage better with your saving - but it’s important to consider all factors before to go ahead. There may be a difference in the costs you pay on a SIPP versus old workplace schemes. Additionally, your old pension schemes may offer benefits that will not be available if your transfer your savings to a SIPP.  

You can read more about the transfer process, including how to check is consolidating will work for you, here.

Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. Tax treatment depends on individual circumstances and all tax rules may change in the future. Withdrawals from a pension product will not be possible until you reach age 55 (57 from 2028). It’s important to understand that pension transfers are a complex area and may not be suitable for everyone. Before making your decision, please read our transfer guide Moving your investments to Fidelity, which explains the options available and gives you the important information you need to know about transferring investments. If you’re thinking about transferring a pension, please read our pension transfer factsheet. Pension transfers can be complex and some types of pension, in particular those with guaranteed benefits such as defined benefit schemes and pensions with safeguarded benefits, are not eligible for the cashback offer. Advised transfers are not eligible for the offer. If you are in any doubt whether or not a pension transfer is suitable for your circumstances we strongly recommend that you seek advice from one of Fidelity’s advisers or an authorised financial adviser of your choice.

Share this article

Latest articles

The UK’s best-kept secret

The importance of re-investing dividends


Tom Stevenson

Tom Stevenson

Fidelity International


Andrew Oxlade

Andrew Oxlade

Fidelity International

What does a £1m pension pot buy?

How to make your pension savings last


Becks Nunn

Becks Nunn

Fidelity International