Impact of Personality Type on Potential Pension Losses: Up to £121,000 at Risk
In a recent study by Standard Life, the retirement savings of individuals have been found to be significantly influenced by their approach to pension saving and their personality type.
According to the research, an individual who chooses to delay pension saving until the age of 30 could end up with a retirement pot of £168,000. This is in comparison to someone who begins working at the age of 22 and pays only the minimum monthly auto-enrolment contributions, who could have a total retirement fund of £210,000 by the age of 68.
The study also reveals that consistently saving as soon as possible can potentially add more than £100,000 to one's pension. This is particularly true for individuals who adopt a Type A approach to pension saving, which involves starting early and boosting savings where possible. A Type A personality who increases their employee contributions to 8% could build up a retirement pot of £289,000 by the age of 68.
The study categorises individuals into two main personality types: Type A and Type B. Type A personalities are highly organized, ambitious, and driven by a sense of urgency, while Type B personalities are more spontaneous, laid back, and likely to go with the flow.
The research also considers a scenario where a Type B individual contributes a lump sum of £20,000 at age 50. However, it suggests that this may not be enough to bridge the personality type-gap in retirement pots.
The study does not provide specific savings differences between Type A and Type B individuals over a lifetime, only that the difference could be significant. It also does not explicitly name the pension provider that conducted the study, but it is known to be a well-respected financial institution in the UK.
Dean Butler, managing director for retail direct at Standard Life, emphasizes the importance of understanding how your approach to saving today can impact your retirement pot tomorrow. He states, "Embracing a Type A pension saving approach could significantly boost your retirement pot, with differences of up to £121,000, depending on your saving habits."
The study also adjusts the retirement fund amounts for 2% inflation and assumes a starting salary of £25,000, 3% employer monthly contributions, 5% annual investment growth, and an annual management charge of 0.75%. The retirement fund amounts are also adjusted for 2% inflation.
The trend of labelling oneself as Type A (Competitive) or Type B (Easygoing) has largely focused on how these traits affect day-to-day life, but the new research offers a broader lesson for your money in retirement. It suggests that your personality type could make a six-figure difference to your pension pot over a saving lifetime.
