Three quarters (75 per cent) of pension savers are unaware that investment growth is the main driver of pension pot values over the long term, according to analysis by Standard Life.

The Retirement Voice research asked savers about their perception of what added the most money to a pension pot over the course of a working life.

Only a quarter (25 per cent) chose investment growth, while 39 per cent opted for individual contributions.

However, the firm’s analysis of government figures found that in reality around £65,000 of a typical £100,000 defined contribution (DC) pension pot came from investment growth, while only £18,000 came from individual contributions. Employer contributions added £13,000 and tax relief added £4,000.

The importance of compound investment growth was being overlooked as just 15 per cent of people were actively prioritising pension saving, while 21 per cent said retirement planning was something to worry about later, rising to 35 per cent among Gen Z.

Discussing the findings, Standard Life customer savings and investment director, Jenny Holt, said: “Compound investment growth can be one of the most powerful forces in pension saving, but our research suggests many people underestimate the role it plays.

“Contributions are important, but the real benefit often comes from giving those contributions time to grow and generate returns over decades.”

She explained that starting early, even with modest contributions, can make a difference.

For example, Standard Life analysis found that delaying pension saving by five years – from age 22 to age 27 – could reduce a retirement pot by around £40,000.

This is based on an individual starting on a £25,000 a year salary and paying minimum automatic enrolment contributions.

Holt said that while many people are balancing pension saving against immediate financial pressures, those who start saving earlier and take full advantage of employer contributions are more likely to benefit from long-term investment growth.

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