Couples without children could potentially increase their retirement funds by as much as £351,000 by redirecting the money typically spent on raising a child into their pension pots, new analysis indicates.
Pension firm Standard Life calculated that if an adult contributed an additional £13,900 annually for 18 years, starting at age 30, their pension could reach approximately £603,000 by age 68. This figure represents a substantial increase compared to an individual who contributed the minimum auto-enrolment amount from age 22 on a £30,000 salary.
The estimated cost of raising a child to the age of 18 was previously reported by the Child Poverty Action Group to be around £250,000 per couple. When spread over 18 years, this amounts to an annual saving of approximately £13,900 per person.
Standard Life's calculations assume employee contributions of five percent and employer contributions of three percent for the minimum auto-enrolment scenario. The higher savings figure is achieved by adding the estimated child-rearing costs to these contributions.
Even contributing half of the estimated child-rearing cost, around £6,950 per year, could add an estimated £175,500 to a retirement fund, resulting in a total savings pot of approximately £428,000 by age 68, accounting for inflation.
Emma Furlonger, managing director for workplace pensions at Standard Life, commented that individuals without child-related expenses may experience greater flexibility in their household budgets. She emphasized that while consistently investing the full equivalent cost of raising a child might not be feasible, these figures highlight the significant impact of additional, sustained saving over time.
Furlonger also noted that individuals with children might find opportunities throughout their lives to increase their pension contributions. She suggested that making additional payments when possible, such as after a salary increase, when a debt is paid off, or during periods of higher disposable income, can make a meaningful difference in building long-term financial security. The key, she advised, is to find a balance between enjoying current finances and investing for the future.
Recent research from pension consolidation service PensionBee indicated that many individuals, particularly those in their late 40s and 50s, express pessimism about their retirement prospects. Approximately half of this age group reported not seriously considering their pensions until well into their 40s, feeling they had left retirement planning too late. The study identified the 'Generation X' demographic (aged 45-60) as most likely to be under-saving for retirement, citing factors such as the decline of final salary pensions, the later introduction of auto-enrolment, economic instability, and the dual pressures of supporting children and aging parents.