When it comes to saving for retirement, time matters.
The longer your pension savings are invested, the more time they have to enjoy potential compound growth.
But that’s not all.
Timing your contributions could also make a big difference to the eventual size of your retirement pot – to the tune of £24,000, according to data released by one digital pension provider.
For example, say you invest £10,000 into your pension at the start of each tax year. Assuming you achieve annual growth of 5%, after 25 years your pot could be worth roughly £24,000 more than someone contributing the exact same amount at the end of every tax year.
And yet, many people tend to wait until the end of the year to top up their pensions.
Here’s why paying into your pension early in the tax year could make a big difference to your final pot.
Get ahead of the last-minute pension contributors
The end of the tax year is a busy time for us at KBA, as clients dash to ensure they’ve made the most of their annual tax allowances. And the same is true for many UK financial planning firms.
According to MoneyWeek, “One-off pension contributions in March reached up to 4.4 times the average monthly level seen throughout the rest of the year.”
With around 22% of annual pension contributions made towards the end of the tax year – and average contribution values in March around three times higher than in most other months – many people may be missing out on valuable potential growth.
Pound cost averaging could help to boost potential returns on your pension savings
If you’re among those waiting until the end of the tax year to contribute a single lump sum to your pension instead of drip-feeding smaller sums regularly throughout the year, you may be missing not one but two tricks.
No matter how large, a single one-off payment at the end of the tax year could potentially mean:
- Your money has less time to grow
- You miss out on the advantages of pound cost averaging.
Pound cost averaging is achieved by investing small sums of money at regular intervals – typically monthly. Drip-feeding your money into stock markets can help to reduce the risk of investing a large lump sum in one go.
How pound cost averaging works
Say you invest a lump sum of £12,000.
If the market drops by 10% over the following year, your investment may also fall by the same amount.
On the other hand, if you spread that investment out and instead invest £1,000 every month throughout the year, while the market may still drop in the same way, you’ll be buying into the market at a lower price each time. As a result, while the value of your total investment might still decline, it may only be by 5%.
In short, pound cost averaging could help to reduce the impact of volatile markets because, over time, you end up buying at the average market price.
If markets fall, your investment will buy more stocks or shares because prices are low. Meanwhile, if you invest when markets are high, your money will buy fewer stocks or shares.
History has shown that, over the long term, markets usually recover. Although pound cost averaging may not result in better returns, investing regularly could help to smooth some of the bumps and make it a little easier to navigate market volatility.
The start of a new tax year is a great time to start a long-term savings habit
If you’re not already making regular monthly contributions to your pension, now may be a great time to start.
The new tax year started on 6 April 2026, so we’re only two months in.
If you’d like to beat the end-of-tax-year rush and start making regular contributions to your pension pot, please get in touch.
We’ll help ensure you’re making the most of all the tax allowances and are receiving the appropriate pension tax relief on your contributions. We’ll also make sure your pension savings are invested appropriately and aligned with your attitude to risk and long-term objectives.
Get in touch
It’s never too soon to plan for the future you want. To find out how we can help turn your dreams into a reality, please get in touch.
Email contactme@kbafinancial.com or call us on 0161 260 2002.
Please note
This article is for general information only and does not constitute advice. The information is aimed at individuals only.
All information is correct at the time of writing and is subject to change in the future.
The value of investments and any income from them can fall as well as rise and you may not get back the original amount invested.
Past performance is not a guide to future performance and should not be relied upon.
Approved by The Openwork Partnership on 02/06/2026.