Pension pots could be slashed by £300,000 due to 'significant' life choice - how to protect your retirement

From failing to start a pension to switching to part-time work, experts are breaking down the crucial life decisions that have far-reaching consequences for retirement savings.

The Institute and Faculty of Actuaries (IFoA) has identified these key moments that could dramatically affect people's financial futures, with some individuals potentially facing multiple significant impacts throughout their lifetime.

These new findings show how short-term decisions can have substantial long-term effects on pensioner financial prospects, with many people unaware of these hidden costs.

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Not starting a pension could be the costliest decision, with the IFoA warning this choice alone risks losing £300,000 from retirement savings. The second major financial hit comes from opting out of pension schemes, which could result in a £100,000 reduction in pension funds.

Missing out on extra employer National Insurance contributions represents another significant loss, potentially costing savers £100,000 over their working life. Said contributions go towards someone's state pension entitlement.

Experts emphasise these choices often occur during key moments in people's lives, with many being unaware of the substantial financial implications. The findings highlight how seemingly straightforward workplace pension decisions can have dramatic effects on retirement funds.

Taking maternity leave over a six-month period could cost women £30,000 in pension savings, marking the fourth significant financial impact identified by retirement analysts.

Divorce represents another major life event affecting pension wealth, though the financial implications vary significantly between couples. The transition from full-time to part-time work delivers one of the heaviest blows to retirement savings, potentially reducing pension pots by £200,000.

Alexandra Miles from IFoA's pensions gap working party has expressed deep concern about these financial losses during significant life moments. "It is concerning that an individual could stand to lose a staggering amount of money during some of the most significant moments of their lives," she said.

Miles warned that many people remain unaware of these hidden costs and their long-term pension implications. She emphasised the need for action based on their analysis of the pension gap problem.

"We must now act on it to further explore and overcome the hurdles – structural and attitudinal – that people face when saving for their retirement," Miles stated. She called for equitable and long-term policies, alongside structural support to help people feel more in control during key life moments affecting pensions.

IFoA president Kartina Tahir Thomson highlighted the severity of the findings in stark terms. "The numbers presented in this report are stark. When we are making some of the biggest decisions in our lives, it is worrying that so much is at stake," she said.

Thomson emphasised how many people remain unaware of hidden costs that may not impact them until later in life. She noted these impacts often surface during what could be considered the most vulnerable years of people's lives.

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The research demonstrates the crucial work of actuaries in serving public interests, she explained. The IFoA's latest pension alert comes after a very important deadline for pensioners.

Older Britons looking to access the up to £300 in energy bill support had until December 21 to apply for Pension Credit. This is the means-tested benefit which pensioners need to claim to get the Winter Fuel Payment.

Chancellor Rachel Reeves confirmed the benefit's means-testing earlier this in a move that has been widely criticised by pensioner advocacy groups and poverty charities.

December 21 was the date people had to apply for Pension Credit to backdate their Winter Fuel Allowance claim. Some 700,000 pensioners are estimated to be losing the payment as a result.