Switching to part-time work at 35 risks reducing retirement savings by £58,000 – Standard Life

Switching to part-time work at 35 could reduce a person’s retirement savings by as much as £58,000, according to analysis from Standard Life, part of Phoenix Group.

However, the research found that increasing the pension contributions to 13% (10% employee, 3% employer) while working part-time, could nearly close this gap, ending up with a retirement fund of £206,000, almost matching the £210,000 a full-time worker would save under minimum contributions.

The analysis showed that someone who began working full-time at age 22 with a salary of £25,000 per year, and paid the minimum auto-enrolment contributions (5% employee, 3% employer) could save £210,000 by age 68, even after adjusting for 2% inflation.

However, switching to part-time work (three days a week) from age 35 could reduce their total retirement savings to £152,000.

Dean Butler, managing director for Retail Direct at Standard Life, part of Phoenix Group said: “Whether personal choice or not, part-time work is a good option for many and can help to balance an income with other responsibilities or interests.

“Whilst it is not always strictly a financial decision, going part-time does have an immediate impact on short-term finances as well as a long-term impact on retirement if you continue saving at the same level but with a lower salary to contribute from.

“It will not always be possible, but if you can, increasing your pension contributions when you make the move to part-time work could go some way towards, or completely fill the gap.

“There is always a trade-off involved but it’s worth keeping long-term savings in mind, and considering whether you’re on track for the standard of living you expect in retirement.

“A good starting point is using the Retirement Living Standards tool from the Pensions and Lifetime Savings Association which outlines what you would need to fund a minimum, moderate and comfortable lifestyle.

“This will help you determine whether you’re on track to meet the savings required, and make any adjustments to your finances if not.”