Britons could lose £77k in retirement savings when ‘taking a break from work’

The firm’s study examined someone starting employment at 22 with a £25,000 annual salary, contributing through auto-enrolment at standard rates of five per cent from employees and three per cent from employers.

Without any breaks, this individual would accumulate £210,000 by age 68 in today’s money. However, a single year away from work at 30 would reduce this to £205,000, whilst a three-year gap would slash the final sum to £195,000.

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Analysts are warning Britons could hurt their retirement if they take a career break

Standard Life’s calculations show that someone taking a 16-year hiatus at 30 would see their retirement fund shrink to just £133,000.

As such, this results in a staggering £77,000 reduction from the standard projection.

These gaps prove costly because pension growth relies on consistent contributions building investment returns over time, analysts note.

Each missed payment means less money working in the markets, reducing the compound growth that forms the foundation of retirement planning.

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Dean Butler, the managing director of Retail Direct at Standard Life, cautioned against underestimating these financial consequences.

“While dropping everything and taking time out is very tempting, and sometimes unavoidable, in reality, the financial impact can be quite stark,” he stated.

Butler highlighted that employment gaps affect more than immediate earnings. “Even short gaps in employment can have a lasting impact – not just due to the loss of earnings during that time, but also because of the often-overlooked hit to your pension, with both your own contributions and your employer’s pausing,” he explained.

He stressed that “these missing payments can really add up by the time you reach retirement”.

Butler offered practical guidance for those facing employment gaps.

“If you’re taking a break from work, it’s a good idea to keep your pension in mind, as even small amounts saved now can make a big difference in the long run,” he advised.

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Workers earning below £3,600 annually can still contribute up to £2,880 yearly to pensions, with Government tax relief adding £720.

Those returning part-time can boost their reduced contributions voluntarily.

Butler noted that employees earning under £10,000 must request pension enrolment, though employers must contribute if earnings exceed £6,240.

He recommended checking whether former workplace pensions accept continued payments or establishing new arrangements.