Many people are unaware of the consequences of certain life choices that could reduce their pension pot by hundreds of thousands of pounds, according to research from the Institute and Faculty of Actuaries (IFoA).

Its analysis, which investigated the potential barriers people face when saving for retirement, used actuarial modelling on various scenarios to explore the impact these barriers had on pension saving and the gaps they create.

The IFoA identified six ‘significant’ moments throughout life where decisions made by an individual can have the most profound impact on retirement savings.

It found that not starting a pension could leave someone £300,000 worse off in retirement, while moving from full-time to part-time work could lead to £200,000 less in pension savings.

Opting out of a pension and not taking advantage of additional employer contributions could each result in £100,000 less in retirement, according to the analysis, and six months maternity leave could lead to £30,000 less in pension savings.

Getting a divorce was also highlighted as a decision that could impact retirement savings, although the amount would vary between couples.

Individuals who do not start a pension are most at risk of losing out, the IFoA stated, with early contributions making a “big difference”.

For a young saver, starting a pension at age 35 instead of 25 could mean their pot is only £500,000 at retirement instead of £800,000, according to the modelling.

The IFoA’s research also outlined recommendations to address these pension gaps, with advice aimed at governments, employers and individuals.

These recommendations included creating long-term equitable pension policies, proactive steps by the government and employers to provide support around saving and pensions, and ensuring people take individual action to protect themselves against pension gaps.

“It is concerning that an individual could stand to lose a staggering amount of money during some of the most significant moments of their lives,” said IFoA Pensions Gap working party, Alexandra Miles.

“On top of this, they may be largely unaware of these hidden costs and the drastic impact that short-term decisions can have on their pension savings over the long-term. Some may be faced with multiple significant moments throughout their lifetime, further compounding the issue.

“We have the data and have run the analysis that shows the extent of the pension gap problem, we must now act on it to further explore and overcome the hurdles - structural and attitudinal - that people face when saving for their retirement. In this research we have tailored recommendations to governments, employers and individuals.

“At the heart of the recommendations is a call for truly equitable and long-term policies, and the structural support that can make a difference in practice, ensuring that people feel more in control at the key life moments that matter for pensions.”

IFoA president, Kartina Tahir Thomson, added: “The numbers presented in this report are stark. When we are making some of the biggest decisions in our lives, it is worrying that so much is at stake.

“On top of this, many people are unaware of the hidden costs of their decisions that may not impact them until years later, during what could be considered the most vulnerable years of their life.

“This research is an example of the important work actuaries do in the interests of the wider public, collaborating with industry and stakeholders to highlight areas of concern and set out practical steps to address them.”

---