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The high cost of pausing your pension contributions
More than a third (37%) of people who have experienced a major life event say that they have paused, stopped or reduced their pension contributions as a result, according to research from Standard Life.
On average, people pause their contributions for two years following life events, such as taking a career break or being made redundant.
Here, we look at how even a temporary pause in pension contributions can cost you over the long term and how to mitigate the impact of major life events on your retirement savings.
The life events most likely to affect your savings
Taking a career break (45%), such as maternity leave, is the life moment most likely to disrupt people's pension saving, according to Standard Life's research. People paused contributions for one year and 10 months, on average, as a result.
This is closely followed by redundancy (44%), with contributions being paused for one year and four months, on average.
Becoming self-employed (33%), having a long-term illness (28%) and having children (21%) were also among the five life events most likely to lead people to pause, reduce or stop contributions.
The long-term cost of pausing contributions
Calculations by Standard Life highlight the significant impact that breaks can have on the final value of your retirement savings.
Someone starting work at the age of 22 on a salary of £25,000 and who pays the minimum monthly auto-enrolment contributions (5% from the employee, 3% from the employer) could build a total retirement pot of around £210,000 by the age of 68.
Here's how that amount could be reduced by a pause in contributions:
| Length of pause | Timing of pause | Total pot at retirement | Reduction in pot value |
| 2 years | Between the ages of 30 and 32 | £200,000 | -£10,000 |
| 5 years | Between the ages of 30 and 35 | £185,000 | -£25,000 |
| 10 years | Between the ages of 30 and 40 | £161,000 | -£49,000 |
| 15 years | Between the ages of 30 and 45 | £138,000 | -£72,000 |
Source: Standard Life. Figures assume investment growth of 5%, salary growth of 3.5%, inflation of 2% and charges of 0.75%.
How to mitigate the impact of life events on your pension
1. Start at an early age
It may be inevitable that you have to neglect your pension savings at some stage, but starting to save at an early age will set you up for the future.
Making pension contributions at the start of your career means that you benefit from compound interest over a longer period. Compound interest means that investment returns on contributions are reinvested to produce their own returns, allowing your pot to ‘snowball’ over the decades.
Our calculations show that you need total monthly contributions of £423 to achieve the 'moderate' retirement living standard of £31,700 a year if you start saving at age 30 (assuming you access your money via pension drawdown).
If you start at 40, the required monthly contribution rises to £675.
- Find out more: how much will I need to retire?
2. Make hay while the sun shines
Minimum contributions to a workplace pension scheme under auto-enrolment rules are a total of 8% of your earnings between £6,240 and £50,270 – this is made up of 5% from you (including at least 1% from the government via pension tax relief) and 3% from your employer.
Increasing your contributions by even a small amount can make a big difference over time, especially if you start early.
Even if you can't commit to increasing regular contributions, boosting your contributions as and when you can afford it – for instance, when you get a pay rise or bonus – will help plug a potential shortfall caused by major life events.
- Find out more: how to boost your pension
3. Delay accessing your pensions
You can take money from your defined contribution pension when you reach the age of 55 (rising to 57 in 2028).
But if you've stopped making contributions into your pension for a while, it's sensible to avoid taking money from it at the earliest opportunity, to give your pot more time to grow.
The current state pension age is 66, starting to rise to 67 between April 2026 and April 2028. It may be inevitable that you have to access your private pension savings before then, particularly if you stop work in your early 60s.
4. Maximise your state pension entitlement
A career break won’t necessarily affect your state pension entitlement.
You need to have made at least 10 years of National Insurance (NI) contributions to be eligible for the state pension and at least 35 years to receive the full amount.
If you have any gaps in your NI record (years where you didn’t pay National Insurance or qualify for NI credits), you can top up your state pension by buying voluntary National Insurance credits.
If you're not working and receive child benefit, you’ll automatically qualify for NI credits, which count towards your state pension entitlement. The same applies if you're in receipt of carer’s allowance.
You will also receive NI credits towards your state pension while unemployed, provided you're actively seeking work and claiming benefits such as jobseeker’s allowance or universal credit.
- Find out more: how much is the state pension?
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