Pension disengagement could cost workers over £500,000 in retirement, according to a report from PensionBee.

The study found that failing to actively engage with pensions, including ineffective investment strategies, inadequate contributions, and poor pension management, could cost savers hundreds of thousands of pounds over their lifetimes.

Over 90 per cent of pension savers remain in default funds, which, while convenient, may not maximise returns, suggested PensionBee.

They said a saver achieving 3 per cent annual investment growth could accumulate £194,185 by age 68.

However, those in a fund achieving 7 per cent growth could amass £697,247 - a difference of £503,061.

Furthermore, investing the minimum required contribution of 8 per cent into a workplace pension is common.

Yet, PensionBee found that a saver contributing 13 per cent of their qualifying earnings could accumulate an extra £121,366.

Meanwhile, opting out of pension contributions for just three years at age 30 could reduce the retirement pot by £17,445, and delaying starting contributions until 30 instead of 21 could result in a £53,085 shortfall.

The study showed paying high management fees and losing track of pension pots could also diminish retirement savings.

Paying annual fees of 1 per cent could shrink pension savings by £17,711, compared to paying fees of 0.7 per cent, according to the study.

An analysis of PensionBee’s customers aged 18-54, who were in the accumulation phase of retirement savings, revealed how even small, consistent actions could lead to significantly better retirement outcomes.

On average, customers who logged in to the app five times or more per month held pension values three times greater (£31,076) than those who logged in less frequently (£9,614). Across all age groups, more frequent logins correlated with larger pension pots.

Additionally, customers who switched from the default plan to more specialised funds held higher average pension values (£24,604) than those remaining in the default fund (£15,220).

Finally, customers who joined PensionBee at the same time with the same average pension value and used the pension calculator tool 2-3 times saw their pots grow threefold in around six years, compared to pots doubling for those who didn’t over the same period.

PensionBee chief business officer, Lisa Picardo, commented on the findings: “Engaging with your pension doesn’t have to be overwhelming. Many people put it off until retirement is near when changing the outcome is much harder. But our research shows that small, early actions can make a profound difference.

“Simple steps such as regularly reviewing your pension, consolidating old pots, and increasing contributions, when possible, can dramatically improve retirement outcomes. But the responsibility doesn’t only lie with savers.

"The pension industry must do more to support customers by simplifying fund information, making it easier to compare options and make informed decisions.

“Government action is also key to empowering savers to build the retirement they deserve.

"Introducing a 10-day pension switch guarantee would eliminate unnecessary delays, facilitate timely decisions, and allow savers to switch to providers more aligned with their needs or offer better value for money.”

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