Those who start saving between 40 and 66 are likely to be nearly £200,000 worse off compared to those who start saving consistently at 22, despite an increase in wages, Standard Life has found.

Analysis by the firm, which is part of Phoenix Group, has found that early pension savings widens the options available when it comes to deciding when to retire, with the potential power of investment growth.

Standard Life looked at four scenarios to determine the savings outcome of an individual on typical earnings saving through the workplace.

The study examined the long-term saver, who saves from 22-66 on a starting salary of £25,000; the early start, early finisher, who saves from 22-55 on a starting salary of £25,000; the late start, early finisher, who starts to save at the age of 40 from 40-55 at £46,500; and the catch up saver, who starts saving from 40-66 at £46,500.

The analysis found that the long-term saver could accumulate £435,000 by the time they were 66, not taking inflation into account. This assumes a 3.5% salary growth per year and the standard auto-enrolment contributions (3% employee, 5% employer).

In comparison, the catch-up saver would only accumulate £247,000, despite a higher salary. In order to catch up with the long-term saver, the catch-up saver would have to make significantly higher contributions, equating to 14% of their salary.

The analysis also demonstrated that for those that choose to retire early, the difference in pension payouts between the early start, early finisher and late start, early finisher would be £218,000 and £95,300 respectively.

Managing director for customer at Standard Life, Dean Butler, said: “It’s never too late to start saving and these figures illustrate that even over 15 years, people can accumulate significant sums in their pension which benefit from employer contributions and tax relief. That said, what stands out is that the earlier you start, the greater your options.

“Over the years the combination of contributions and compound investment growth can really add up. If you are going to start saving later then it’s important to think carefully about contributions and what the standard auto-enrolment levels will generate in retirement.”

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