The value of the average UK pension pot has risen by 16 per cent, increasing from £17,379 to £20,077 over the past year, new analysis shows.
More people are saving into their retirement funds, despite cost of living pressures, according to PensionBee.
Savers in the North West have seen the largest increase to their pension, with their average pot rising from £13,270 to £15,651 between March 2023 and March 2024, an increase of 18 per cent.
Residents in the South East continued to save the most into their pensions, with an average pot size of £25,734, surpassing the national average by 28 per cent.
Meanwhile, the average pension pot in London came to £23,393 – exceeding the national average by nearly 12 per cent. One reason for this, is that London has the highest average weekly income in the UK.
Further analysis from PensionBee also predicted how much different age groups are expected to retire with. Savers under the age of 30 are likely to retire with larger private pension pots compared to their elder counterparts.
On average, younger savers could retire with a private pension pot worth £195,058 by the age of 66, while those above the age of 50 are likely to retire with an average pension pot of £87,887. It’s important to note, however, that older savers may also hold “gold-plated” defined benefit pensions so will have access to them.
Gender pension gap
The data also highlighted the ongoing problem with the gender pension gap – which remains a “persistent issue” across all regions.
Women in Northern Ireland face the largest pension gap at 44 per cent, with their average pension savings at £13,884, compared to £16,390 for men.
The gender disparity is lower in London, with the gender pension gap at 29 per cent. On average, men’s retirement savings total £26,646 while women’s pension pots are lower, at £18,786.
This “relatively narrower gap” could be linked to the fact that London has the highest average salary for women in the UK.
Gender disparity in pensions is a pressing problem. Women in middle age must pay £213 more per month than men to match their workplace pension pot at retirement age, according to a report that warns without government action the gap will persist for decades.
By the time both genders reach 45 years old, men have £88,000 in their pension pot on average while women have £46,000, a difference of 48 per cent, analysis of government data by interactive investor shows.
They would need to contribute 22 per cent of their salary from age 45 to match the average man by retirement age.
The problem starts right at the beginning of a woman’s career.
According to Legal & General, a woman start’s her working life with an initial pension gap of 16 per cent – by the time they reach retirement, the average size of a man’s pension pot is twice that of a woman’s.
On average, men have more than twice as much saved in their pension pots as women, setting themselves up for a much more comfortable retirement. In contrast, a third of women have less than £5,000 in their pension pot, and are more likely to not know the size of their pension pot at all.
Becky O’Connor, Director of Public Affairs at PensionBee, told i: “The gender pension gap is the fly in the ointment of general progress on pensions.
“It persists mainly because women who become mothers take more time out of full-time employment, and often their employment and earnings do not get back on track, making it harder for them to close this gap once it has formed, in the child-bearing years.”
Tips to maximise your pension savings
- Check whether you’re making the most of your employer contributions at work. Some workplaces offer matched and even double-matched contributions beyond what you are “defaulted” into. These enhanced contributions are absolute gold dust if you want to boost your pension.
- Check the type of investment plan behind your pension. If you are at least 10 years from giving up work, a medium to high growth plan that comes with a bit more risk is likely to generate higher investment returns than a cautiously invested plan.
- Many schemes automatically “lifestyle” older workers into more cautious plans, however there is controversy over this as it means some savers may miss out on the opportunity to maximise growth. It’s worth checking to see if you have been moved into a more cautious set of investments unnecessarily early, based on your circumstances.
- Review your own contributions and if you can afford to increase them by even a small amount, it’s worth it. This is particularly true if you are approaching retirement. The extra tax relief you generate is a kind of return on investment that you just can’t get on anything else, at 20 per cent for basic rate taxpayers and 40 per cent for those paying the higher rate of tax.