The secret to saving more for your retirement could be regularly switching jobs, figures suggest. In fact, according to FTAdviser in November 2024, those who frequently take new career opportunities have more saved for retirement.
For many workers, gone are the days of a job for life. Instead, employees are switching jobs more frequently than ever. Figures from 2024 collected by StandOut suggest the average Brit changes jobs every five years, and around 1 in 10 have made a career change in the last decade.
While searching for a new position and settling into the role can be stressful, it may be financially savvy.
The FTAdviser report indicates that job hoppers – workers who have switched jobs four or more times in the last 10 years – could boost their pensions by around £15,000.
Higher salaries are the top reason for job hopping and the key to increasing your pension
Unsurprisingly, the StandOut data found the number one reason for looking for a new job was to secure a higher salary. Indeed, 38% of UK employees say they want a salary increase due to rising costs.
On average, workers who switch jobs receive a 5.2% pay increase.
Not only does this income boost provide you with greater financial freedom in the short term, it often means you’re in a better position to save for your future.
As the minimum auto-enrolment pension contribution for employees is 5% of pensionable earnings, a pay rise will typically mean more money is going into your pension each month. So, even if you don’t make additional contributions, a job change could boost the value of your pension.
As a result, the FTAdviser research found the average job hopper has £105,538 in their pension. In comparison, the average adult has £89,762.
Higher pension contributions are likely to play a role, but so are potential long-term investment returns.
Usually, the money held in your pension is invested with the aim of delivering long-term growth. As you can’t normally access your pension until you reach pension age, the returns are also invested and have the potential to deliver further growth.
This compounding effect means even a small increase to your regular pension contributions could lead to a more comfortable retirement lifestyle.
While higher salaries are a key reason why job hoppers see a boost in their pension, it’s not the only reason.
A new employer might offer additional perks that could support your retirement goals. For example, they could make higher employer pension contributions on your behalf, or offer a salary exchange scheme that provides you with an efficient way to save for your future.
5 practical ways to increase your pension without switching jobs
While the research indicates switching jobs could be a useful way to boost your finances now and in the long term, it’s not your only option.
There are plenty of reasons why you might not want to seek a new position; perhaps you enjoy your current role or it offers flexibility that suits your lifestyle. Whatever your reasons, there are other steps you may take to boost your pension.
1. Negotiate your salary
Changing jobs isn’t the only way to increase your salary. Regularly reviewing your role and salary could help you negotiate a pay rise.
You might choose to do this as part of performance reviews or, if you want to discuss it sooner, ask for a meeting with your manager.
While you may be confident in your skills, it can still feel daunting to speak about salary. Indeed, in 2022, YouGov found that more than half of employees had never asked for a pay rise. Doing some preparation could help you feel more at ease. Consider how your work has contributed to the success of the business, how your role has changed, or skills you’d like to develop.
2. Increase your pension when you receive a pay rise or bonus
While many workers make only the minimum contribution to their pension, you can increase yours.
So, next time you receive a pay rise, could you put more into your pension to support your retirement goals? If you receive a bonus, you might also want to consider making a one-off pension contribution.
Keep in mind that you cannot normally access money held in your pension until you turn 55 (rising to 57 in 2028). As a result, it may be important to consider your wider financial circumstances before making additional pension contributions.
You should also note the Annual Allowance limits how much you can tax-efficiently contribute to your pension. In the 2024/25 tax year the Annual Allowance is £60,000 and covers your contributions, tax relief, and contributions made by your employer or other third parties.
Please note that your Annual Allowance could be reduced to as little as £10,000 if you have previously taken a flexible income from your pension or if you’re a high earner. If you have any questions about your Annual Allowance, please get in touch.
3. Boost your pension when financial commitments end
As other financial commitments end, you might also want to consider using this extra money to increase the value of your pension.
For instance, once you’ve finished paying a car loan or mortgage, you may deposit the same amount into your pension. As you’ll be used to allocating this money for other financial commitments, it could be a simple way to increase your pension contributions without reducing your disposable income or affecting other goals.
4. Maximise your employer pension contributions
Under auto-enrolment, employers must contribute a minimum of 3% of pensionable earnings to the pensions of eligible employees. However, many businesses will increase contributions if you do or offer other ways to get more out of your pension.
So, it’s worth checking your contract or employee handbook to see if you’ve overlooked a way to increase the value of your pension.
5. Review how your pension is invested
Finally, the performance of your investments held in your pension could have a huge effect on the value of your pension at retirement.
If you haven’t selected an investment fund for your pension, your money will usually be invested in the default fund option. However, that might not be right for you, so checking your other options could mean you have an opportunity for greater investment returns over a long-term time frame.
Remember, investment returns cannot be guaranteed and you should consider what level of financial risk is appropriate for you and your goals.
Contact us to talk about your retirement plans
Pensions are often essential for reaching your retirement goals, and we could help you understand how your pension contributions now might lead to the lifestyle you’re looking forward to. Please get in touch to discuss your retirement plan and how we could offer support.
Please note: This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.
The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.
Workplace pensions are regulated by The Pension Regulator.
