Playing the lottery can be fun – there’s a slim chance you might win a life-changing sum of money, the PensionBee team notes in a blog post.
However, new modelling from PensionBee, reveals if the approximately 50% of UK adults who regularly “enter the National Lottery each week, diverted the weekly amount spent into their pension, they could boost their pot by nearly £10,000 by the time they retire.”
PensionBee’s analysis revealed that “an 18-year-old entering the National Lottery ‘Lotto’ draw once a week, has roughly less than a 0.05% chance of winning a prize pot of £10,000 at least once by the time they reach the average retirement age of 66.”
However, if someone instead “contributes the cost of a weekly lottery ticket (£2) into their pension each week from the age of 18 until they retire at 66, they could boost their eventual pension pot by an extra £9,958.”
Those entering the lottery twice a week “could have an additional £19,930 in their pension pot by age 66 if they contributed £4 a week into a pension from the age of 18.”
Becky O’Connor, Director of Public Affairs at PensionBee, commented:
“It’s hard to overcome the allure of receiving millions of pounds overnight, which is why so many of us play the lottery week in week out, even if we rarely win anything. But there’s more chance of ‘winning’ big with a pension than there is entering the lottery – the catch is that you have to wait until you reach retirement to reap the reward.”
Tips to help you boost your pension savings
- Consider boosting your monthly pension contribution by 1%: While this may seem like a modest adjustment, even a small increase today can have a significant impact on your future pension pot due to the power of compounding. This is hopefully a manageable change that shouldn’t drastically impact your current lifestyle but lays the groundwork for greater financial security.
- Maximize employer contributions: Employers are required to pay a minimum of 3% into a workplace pension, but some may be willing to pay more or even offer match contributions should you wish to increase your pension contributions. Contribution matching can help build your retirement savings faster, so it’s always worth asking your employer if this option is available.
- Check the type of investment plan behind your pension: If you are at least ten years from giving up work, a medium to high growth plan that comes with a bit more risk is likely to generate higher investment returns than a cautiously invested plan. Many schemes automatically ‘lifestyle’ older workers into more cautious plans, however there is controversy over this as it means some savers may miss out on the opportunity to maximise growth. It’s worth checking to see if you have been moved into a more cautious set of investments unnecessarily early, based on your circumstances.
- Combine your pensions where it makes sense to: With at least 4.8 million pension pots considered to be ‘lost’ in the UK, it’s important to keep track of all your old workplace pensions to ensure you’re not missing out on any hard-earned savings. Combining your old pensions into one can help you assess if you’re on track for the lifestyle you want in retirement, or if you’ll need to increase your contributions.
