Young workers delaying making contributions to their pension could see them lose out on upwards of £21,000 at retirement, with Purely Pensions raising concerns that younger generations could skip long-term saving due to the Covid-19 crisis.

The firm pointed out that a person beginning work at 22 with the median salary who makes contributions of 10 per cent of their salary, pays product charges of 0.4 per cent and achieves average fund growth of 4 per cent annually, would reach retirement age of 68 with a pension pot valued at £170,733.

If the same individual waited until age 27 to begin making contributions, their pension pot would be £149,679 under the same conditions, while someone starting contributions at age 32 would reach retirement age with just £131,786.

The firm said the findings were particularly poignant as Royal London survey data has indicated that 40 per cent of millennials have opted to pause pension contributions because of the pandemic.

Purely Pensions head of pension advice, Matthew Amesbury, said: “The negative financial impact of the crisis has led many to seek ways of maximizing their take home pay and for a large minority of younger people, it seems they have chosen to stop their pension contributions as a result.”

He added that these people will “significantly miss out on the benefits of compounding interest and long-term growth”, warning the impact of this “is staggering and it could even worsen their later life prospects”.

Amesbury continued: “Without knowing it, failing to save for retirement in early life could actually be leaving these people poorer in their older years. It may also put individuals under pressure to choose riskier investment options in later life to make up the difference.

“The benefits of pension tax relief and long-term saving significantly outweigh the short-term perks of increasing a person’s take-home pay. Despite the difficulties of the crisis, people should still think first before making changes to their retirement savings and speaking with an adviser is always a good place to start.”

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