The longer people wait to start saving for retirement, the worse off they could be, Standard Life has said, after its research found that delaying saving by five years in a person's twenties could mean £40,000 less in retirement.

The research found that those who begin working on a salary of £25,000 per year and pay the minimum monthly auto-enrolment contributions (5 per cent employee, 3 per cent employer) from the age of 22, could have a total retirement fund of £210,000 by the age of 68, (adjusted for inflation).

However, if a person waits until age 27 to start contributing, this could result in a total pot of £170,000 – £40,000 less.

Postponing for even longer could have an even bigger impact on a retirement pot, as Standard Life’s data shows that if a person starts saving for retirement at age 32, they will have £74,000 less, while someone who starts saving for retirement at age 42 would have £127,700 less.

Standard Life highlighted that the key difference is that those who begin paying into their pension later in life could miss out on the power of compound investment growth.

However, the company acknowledged that a “balance must be struck” between saving for the future and meeting near-term costs and goals, with the analysis highlighting the challenge that delaying saving for several years can create in the long run.

Standard Life managing director for retail direct, Dean Butler, said that although pension saving might not be the top of the priority list in people’s twenties, it is “hugely beneficial” to start contributing to a pension from an early age.

Butler said that delaying saving in a person’s twenties by as little as five years can reduce a retirement fund by tens of thousands of pounds – and by even more if they leave it longer.

He suggested that if their finances permit and circumstances allow, the sooner people engage with and begin to contribute to their pension, the better their ultimate retirement outcome could be.

Additionally, Butler noted that while delaying entry into the workforce, for instance, to pursue further education can offer long-term benefits, both financially and personally, he said it is “important to be mindful” that this might require people to contribute more later on to meet their retirement goals.

He also explained that for those who choose to become self-employed in their twenties the benefits of opening a personal pension, suggesting that these people will not “benefit from automatic enrolment via a workplace and could miss out on important early-career contributions”.

“Our calculations show that contributing to your pension from the very start of your career maximises the potential compound investment growth and can result in a much larger retirement pot,” Butler said.

“For those in a position to do so, consistently paying into a pension from as early an age as possible and topping up payments, especially in your 20s, 30s or early 40s, can make a massive difference over time.”

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