Do YOU know what creates 65% of the value of a typical pension pot at retirement?

See more This is Money on Google - save us as a Preferred Source Updated: 01:00 EDT, 3 September 2026 Three out of four people are mistaken about what determines the size of their pension by retirement, an industry study reveals.The most common belief is that individual contributions add the most to a pension over the course of a working life, and the second most popular is that employers put in the biggest sums.Just one in four out of 6,000 adults aged 18 to 80 correctly said that investment growth is easily the most important factor in the eventual value of a retirement fund.Some £65,000 of a typical £100,000 pension pot comes from compound investment growth, compared to £18,000 in individual contributions, says finance firm Standard Life.Employer contributions make up £13,000 and tax relief from the Government a further £4,000, according to its analysis of official figures. Just one in four out of 6,000 adults aged 18 to 80 correctly identified the most important factor in the eventual value of a retirement fund'Contributions are important, but the real benefit often comes from giving those contributions time to grow and generate returns over decades,' says Jenny Holt, customer savings and investment director. 'This is why starting early can make such a difference.'Standard Life says someone who starts working at 22 on a salary of £25,000 and pays minimum monthly auto enrolment contributions – 4 per cent individual, 3 per cent employer and 1 per cent tax relief – can build a fund of £210,000 by the time they are 68.This assumes investment growth of 5 per cent a year, salary growth of 3.5 per cent, inflation at 2 per cent and fees of 0.75 per cent.By comparison, it says waiting until age 27 to start saving into a pension under the same scenario would build a pot worth £170,000 because the money has less time to generate investment growth.'Compound investment growth can be one of the most powerful forces in pension saving, but our research suggests many people underestimate the role it plays,' says Holt.'Even modest contributions made earlier in your working life have longer to benefit from potential compound investment growth.'Standard Life's survey found that while 25 per cent of people know investment growth is the main driver of the final value of a pension pot, 39 per cent put it down to their own contributions.Some 27 per cent think it is employer contributions, and 8 per cent believe it is tax relief.Those polled were a mix of working, unemployed and retired people, and weighted to be representative of the UK general population on age, gender and region.Compound growth means because any investment return stays in your pot, you then make a return on that higher amount, and then a return on that even larger sum, and so on over and again.You might start with a small contribution to a pension but making returns on your returns will still have an exponential effect in the longer run.If you are older and have already enjoyed the benefits of compound growth, it is worth telling young adults in your life the story of Prudence and Extravaganza – see the table below What if your pension is falling short If you are worried about whether you will have saved enough, investigate your existing pensions. Broadly speaking, you need to ask schemes the following questions.- The current fund value.- The current transfer value – because there might be a penalty to move.- Whether the pension is in a final salary or defined contribution scheme. Defined contribution pensions take contributions from both employer and employee and invest them to provide a pot of money at retirement. Non-public sector employers have now mostly replaced more generous gold-plated defined benefit – career average or final salary – pensions, which provide a guaranteed income after retirement until you die. Defined contribution pensions are stingier and savers bear the investment risk, rather than employers. - If there are any guarantees – for instance, a guaranteed annuity rate – and if you would lose them if you moved the fund.- The pension projection at retirement age. You can use a pension calculator to see if you will have enough – these are widely available online.You should add the forecast figures to what you anticipate getting in state pension, which is currently £241.30 a week or nearly £12,550 a year if you qualify for the full new rate. Get a state pension forecast here.Consider whether you can afford to pay more into your pension, especially if your employer matches higher contributions, or if you receive bonuses and pay rises.If you are tempted to merge your old pensions, read our guide first to ensure you won't be penalised. If you have lost track of old pots, the Government's free pension tracing service is here. Take care if you do an online search for the Pension Tracing Service as many companies using similar names will pop up in the results.These will also offer to look for your pension, but try to charge or flog you other services, and could be fraudulent. SIPPS: INVEST TO BUILD YOUR PENSIONAJ BellAJ Bell0.25% account fee. 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