I’ve a 15-year hole in my pension… now I’m doing every thing I can to make again that point

Annie Clarke has always known how vital it is to save into a pension.

Despite confessing she knew nothing about finances in her 20s, her parents had drummed into her from a young age to put money aside for retirement.

And as her cousin was a financial adviser, he set her up with a pension at age 23.

Annie, now 60, says: ‘I just paid into it. I was very lucky. At one point my cousin even told me told I needed to save more of my salary.’

But despite this assiduous early saving, Annie now has what she estimates is a 15-year gap in her pension saving history.

The mother-of three says: ‘I got married in 1994 and our finances were tight. I stopped paying in.

‘We just didn’t have any money. Any spare money we used to do up our house. We didn’t even think about our pension.

‘I stopped paying in until my first daughter, who is now 29, was born.’

She made some contributions again after her financial adviser told her that her pension savings weren’t on track.

Annie, who lives near Reading, says: ‘I started paying in again but then finances got too tight once more. Life and children came along so the contributions stopped.’

It means that for around 15 years, Annie – who runs her own book-keeping business – wasn’t saving for her retirement.

That’s money that couldn’t grow and compound over time – and is likely to have left her with a gaping hole in her retirement fund.

It wasn’t until after her divorce in 2007 that Annie realised she was in trouble. The grandmother-of-one admits: ‘I didn’t even give it a second thought during that 15-year period.

‘It took someone – probably my father – to say, ‘What are you doing?’.

Unfortunately, Annie isn’t alone. Swathes of people who have gone through a life change have gaps in their pension savings, fresh research reveals.

More than one in three of those who have experienced a ‘major life event’ – such as a career break, becoming self-employed, or having children – reduce or stop paying into their private pension.

That’s according to provider Standard Life, which says the average pause in pension contributions lasts two years.

When finances are squeezed during a change in someone’s life, it may feel natural to look for easy savings to be made, including stopping payments into a pension.

These monthly payments – ring-fenced for decades down the line – may not seem like vital expenditure to someone taking a career break in their early 30s.

But pausing or stopping payments for even a couple of years could swipe thousands off a pension pot Standard Life warns.

And while the average break is just two years, one in seven pause for more than five years, which can wipe tens of thousands of pounds off of potential savings.

This means that it is vital for those who pause or slash contributions during times of financial hardship to re-start their payments as soon as they can.

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Mike Ambery, a retirement expert at Standard Life, says: ‘Life rarely follows a straight line – and pensions don’t either. 

‘Life events such as being made redundant, managing long-term illness, starting a family, or taking time out are simply part of how people actually live, and it’s completely normal for retirement saving to pause during those moments.

‘The challenge is that pensions build over decades, so even relatively short gaps can have a bigger impact than people expect. A pause might feel temporary at the time, yet it can have a lasting impact if contributions aren’t restarted.

‘Restarting contributions as soon as possible can help rebuild momentum. From there, gradually increasing payments when income rises, using part of a pay increase or bonus to boost pension contributions.’

How a two-year pause could cost you £10,000 

The most common reason for stopping pension payments is taking a career break, as some 45 per cent of those who have paused contributions do so after stopping work for a period of time.

The next most common is following redundancy (44 per cent), closely trailed by becoming self-employed (33 per cent), following long-term illness (28 per cent), and having children (21 per cent).

Not all groups feel the financial strain of major life events as sharply as others.

For example, women are more likely than men to stop or reduce their payments after having children.

Younger adults – who typically earn a lower income than those in their 40s and 50s – are also more likely to forget about their pension during hardship.

If a worker who started saving age 22 didn’t make any reductions or pauses to their pension saving, they would have £210,000 by the time they retire age 68.

This assumes starting salary of £25,000 a 5 per cent annual contribution from a saver and 3 per cent from an employer, and that investments grow by 5 per cent every year. Annual salary is thought to grow by 3.5 per cent a year.

But if pensions payments were paused between the ages of 30 and 32, a pot would be reduced to £200,000.

A five-year pause between 30 and 35 would slash the pot to £185,000.

A 15-year break – the same length as Annie’s – from the age of 30 would shrink a pot to £138,000.

Annie is now ‘chucking’ money into her pension in an attempt to make back that time.

‘I started paying into my pension again to make the use of the tax break. I realised it’s very tax efficient. I put in at least 20 per cent of what I earn. I’m pushing it quite hard.’

‘There’s no point beating yourself up about the past but I’m doing my best to mitigate it,’ she adds.

‘I don’t know when I want to retire, but I feel back on track now.’