Analysis from Scottish Widows has estimated that someone who started their working life in 2012 with the UK’s average salary auto-enrolment programme will have a pension pot worth £121,000 when they retire at 68.

This is if they have made the minimum auto-enrolment contributions throughout their career.

However, someone entering employment from 6 April 2019 could build a pension pot of £157,000 by making the new minimum contributions.

Workers eligible to be auto-enrolled when the scheme was first introduced in 2012 began automatically contributing 1% of basic pay into their pension, matched by 1% from their employer. In 2018 this was increased to a 3% contribution by the employee and 2% from the employer. In April 2019 it will increase to 5% from the employee and 3% from the employer – resulting in an 8% total contribution.

Robert Cochran, retirement expert at Scottish Widows, said: “Retirement can last several decades depending on when people stop working, so increasing minimum contributions since auto-enrolment was introduced has without a doubt provided a boost for the nation’s long-term savings, with more than 10 million people now auto-enrolled. An additional £36,000 in someone’s pension pot through workplace savings could also mean an extra £137 a month in their pocket or £1,650 over a year.”

Scottish Widows is urging workers not to rely solely on minimum contributions and has encouraged people to aim for a minimum of 12% in the past. However, the firm now suggests that today’s workers should be aiming to save nearer 15% to prepare adequately for retirement.

Commenting on the research, Lesley James, financial adviser and director at Simplified Money, said: “Auto-enrolment is an excellent thing. Nudge theory research has proven that the route of least resistance is always the one that wins; 8% per annum is an excellent start to retirement planning. The rule of thumb suggests 10% – albeit you might need to up this if you start later and have a significant bucket list. But it is at least enough to start giving you some choices. And perhaps encourage you to do more when you start to see what’s possible.

“However, more can be done. What I’d like to also see is employers offering access to additional medium-term savings initiatives out of pay packets, perhaps incentivised. The more opt-out-only nudges the better. Aligning these initiatives with the expansion of some excellent default investment options and we could see a real improvement in the financial health of our population.”

Keith Churchouse, director and chartered financial planner at Chapters Financial, said: “It cannot be underestimated the long term benefit that the new auto-enrolment pension contribution increases will have to those saving in the long term, although I fear that some will still not be aware of the cost increase to them until they see their pay-packet at the end of this month, the first month of the increase.

Aamina Zafar is one of the UK’s leading financial journalists. She has previously worked as a senior reporter at FT’s Financial Adviser. The award-winning journalist writes regularly on the IFA community, mortgages, pensions and financial regulation.

Further reading on this topic:

Ten million people are now saving for retirement due to auto-enrolment