Add £37,000 extra to pension pot with direct debit change | Personal Finance | Finance

Savers are being urged to make one simple change to their monthly payments to potentially boost their retirement savings by up to £37,000.

Experts say cutting out wasted direct debits and instead redirecting them into your pension can significantly increase your savings. According to insurance firm Standard Life, the average Brit wastes around £39 per month on direct debits that they don’t want or use, so over the course of a year this amounts to £468 that could have instead been moved into your pension pot for an easy savings boost.

The firm says these unnecessary wasted direct debits often occur at the start of a year when people typically try their hand at something new, such as signing up to a gym or taking out a subscription to fuel a new hobby.

But only around 10% of adults manage to stick to such new year resolutions and by failing to cancel monthly payments straight away, you’re essentially wasting money each month that could be better served going into your pension.

Standard Life analysis found that a person who started working with a salary of £25,000 per year, and paid the minimum monthly auto-enrolment pension contributions of 5% from the age of 22, could have a total retirement fund of £210,000 by time they reach 68.

But if a person opted to redirect their wasted direct debits into their pension pot as well, this could boost it by around £39 on average per month. So by the age of 68 this would accumulate to result in a retirement fund of £247,000 – adding an extra £37,000 more to the pot with this one simple change. The firm says this figure is based on the assumption of a 3.50% annual salary increase, a 5% per year investment growth, plus 2% inflation.

Of course, these figures are an example of the potential savings and the amount you could add to your pension pot is dependent on several factors, including your salary, the age you started work, your pension contributions and the direct debit amount you choose to redirect.

As such, you could add significantly more than £37,000 to your pension or slightly less, but either way it’s still a worthwhile option to redirect some cash into your pension each month, as you’ll benefit from these extra savings – no matter how small – when you come to retire.

Mike Ambery, Managing Director for Workplace Pensions at Standard Life, said:“The New Year is a great time to set goals and build new habits, but when living a busy life, things can easily slip and in the process, it can be easy to lose track of your monthly financial incomings and outgoings.

“It’s very easy to remain signed up to a service or membership that you no longer use and this wastage can really build over time.

“To avoid unnecessary expenses, it’s important to keep an eye on your regular payments and cancel old direct debits or outgoings that you no longer use.

“These extra funds can help with short-term expenses or could give your long-term savings a boost. It’s amazing to see the impact that the average monthly wasted direct debit payment could have if you funnelled it towards a pension instead.”