How Gen Z can supercharge their pensions

Small monthly contributions today could add tens of thousands to future retirement savings

Although retirement might seem distant for many young adults, new analysis shows how small, consistent pension contributions can grow considerably over time. Even modest early increases can benefit from years of compound interest, turning incremental payments into valuable long-term gains and increasing confidence in future retirement plans.

Research shows that someone in their early twenties could add an extra £26,000 to their retirement fund simply by increasing their monthly pension contributions by around £19, roughly the price of a Netflix subscription[1]. This demonstrates how manageable contributions, maintained consistently, can significantly impact retirement outcomes.

Small sacrifices, big results

The analysis emphasises the powerful impact of compound growth. A 22-year-old earning £25,000 who contributes the minimum auto-enrolment rate of 5%, along with a 3% employer contribution, could expect a pension fund of around £210,000 by age 68 (adjusted for inflation). Increasing their own contribution by just 1% could raise that total to £236,000. Raising it further, by the cost of a monthly gym membership or takeaway, could see that figure climb to nearly £290,000.

These examples show how even small lifestyle changes can lead to substantial financial gains. Putting discretionary spending into a pension can result in exponential growth over a career, due to investment returns growing year after year.

Making the most of employer support

One of the easiest ways for younger savers to boost their retirement funds is to check if their employer offers matching contributions. Many workplace pension schemes will boost the employer’s contribution when the employee does, effectively providing free money towards future savings. Reviewing these terms and taking advantage of them where possible can make a significant difference without increasing personal costs.

Currently, salary sacrifice arrangements can be a valuable tool. By redirecting part of their salary into a pension, employees can reduce their National Insurance liability and enjoy extra tax savings. This approach can be especially beneficial for individuals with higher salaries or those starting to plan for longer-term investments. However, the Government has recently published research on various options for decreasing the tax and national insurance “advantages” of salary sacrifice for pension contributions.

Building momentum through small wins

Pension saving doesn’t have to involve major sacrifices. In fact, a simple strategy is to increase contributions whenever your income rises. Allocating part of a pay rise or bonus to your pension is often barely noticeable in daily budgeting but can have a big impact in the long run.

Similarly, one-off windfalls like tax rebates or monetary gifts can be used to top up pensions instead of being spent immediately. Over time, these occasional contributions can grow into a significant addition to your retirement fund. Regularly reviewing your pension, ideally once a year, helps ensure you stay on track and allows you to adjust contributions as your circumstances change.

Balancing today’s priorities with tomorrow’s goals

For many younger workers, the difficulty lies in balancing immediate costs with future security. Rising rents, living expenses, and limited disposable income often make pensions seem like a distant concern.

A good rule of thumb is to prioritise building an emergency savings buffer first, enough to cover several months of living costs, and then increase pension contributions once that safety net is in place. Over time, this approach fosters both short-term financial security and long-term resilience.

Why small changes matter

The difference between starting early and waiting even a few years can be significant. Compound growth benefits consistency, not large one-off sums. For Gen Z workers, starting now, even with modest contributions, provides the best chance of reaching future financial independence.

Making small, manageable contributions each month is more about preparing your future self for success than about giving things up. Finding that balance between enjoying today and planning for tomorrow is what ultimately transforms saving into lasting financial confidence.

Want to make your pension work harder and ensure a brighter future?

Even if you are well beyond the age of Gen Z but still wish to discuss your future plans, we can help you review your contributions, explore employer options, and make small adjustments that could significantly enhance your retirement savings over time. For further information, please contact us.

THIS ARTICLE DOES NOT CONSTITUTE TAX, LEGAL OR FINANCIAL ADVICE AND SHOULD NOT BE RELIED UPON AS SUCH. TAX TREATMENT DEPENDS ON THE INDIVIDUAL CIRCUMSTANCES OF EACH CLIENT AND MAY BE SUBJECT TO CHANGE IN THE FUTURE. FOR GUIDANCE, SEEK PROFESSIONAL ADVICE. A PENSION IS A LONG-TERM INVESTMENT NOT NORMALLY ACCESSIBLE UNTIL AGE 55 (57 FROM APRIL 2028 UNLESS THE PLAN HAS A PROTECTED PENSION AGE). THE VALUE OF YOUR INVESTMENTS (AND ANY INCOME FROM THEM) CAN GO DOWN AS WELL AS UP, WHICH WOULD HAVE AN IMPACT ON THE LEVEL OF PENSION BENEFITS AVAILABLE.

Source data:

[1] Standard Life – Pension Engagement Season: Young Saver Analysis 2025: https://www.standardlife.co.uk/about/press-releases/pes-young-savers