The average Brit wastes nearly £40 a month on direct debits they no longer need or regularly use, according to analysis from Standard Life
It’s a good time to streamline things(Image: Scandistock via Getty Images)
Cancelling unnecessary direct debits could significantly boost Brits’ pension pots, as more people aim to curb needless expenditure to enhance their retirement savings. The average Brit squanders nearly £40 a month on direct debits they no longer require or frequently utilise, such as streaming services, gym memberships and outdated insurance policies, according to an analysis by pension provider Standard Life.
However, cancelling these direct debits and channelling the money into a pension could contribute as much as £37,000 to the pot, nudging more people towards a comfortable retirement. A survey commissioned by Pensions UK reveals that an increasing number of people are striving to take a more active role in managing their pensions, as financial planners persistently warn about the dangers of not saving enough for retirement, as reported by City AM.
Mike Ambery, retirement savings director at Standard Life, said: “Unused direct debits have a habit of quietly draining our bank accounts in the background. Redirecting just a few of those forgotten payments into your pension could make a meaningful positive impact to your financial future.”
Benefits of ditching direct debits
Analysis indicates that for someone starting full-time employment at 22 with a salary of £25,000, paying the minimum employee contribution into a pension could amass a pension pot of £210,000. However, by redirecting £39 of unused monthly direct debit into a pension, retirement funds could swell to £247,000. Meanwhile, those who choose to cancel double that sum, totalling approximately £78, could boost their pot by £73,000.
Mr Ambery said: “If your retirement is decades away, pensions might not feel urgent, but small changes made early on can have an outsized impact thanks to tax relief and the potential power of compound investment growth.”
He encouraged people to thoroughly review terms and conditions before cancelling any direct debits or subscriptions, to prevent possible penalties and harmful effects on credit ratings.
Tracking down forgotten pension pots
Beyond utilising redundant direct debits, Britons can also revitalise their pensions by seeking out misplaced pots. Approximately three million pots await collection across the UK, with an estimated £31bn tied up as numerous individuals overlook retrieving their pension when changing employment. With the tax year’s conclusion drawing near, reviewing allowances could similarly enhance savings.
Mr Ambery said: “It’s worth checking whether you can make your money work harder. Most people can contribute up to £60,000 a year, or 100% of their earnings if lower, into their pension and benefit from tax relief.”
Savers can also utilise unused allowances from earlier years, which proves especially beneficial for those who have secured a salary increase or received a bonus.