Around £65,000 of a typical £100,000 defined contribution pension pot comes from compound investment growth, but three quarters of people do not realise its importance, according to research from retirement specialist Standard Life.

Only 25% of people identified investment growth as the main driver of their final pension value, while 39% believed their individual contributions made the biggest difference. A further 27% pointed to employer contributions and 8% to tax relief.

The findings also showed a lack of engagement with retirement planning, with only 15% saying they actively prioritised pension saving and 21% viewing retirement planning as something to worry about later. This rose to 35% among Gen Z.

The pension specialist's analysis of government figures found that individual contributions account for £18,000 of a typical £100,000 pot, with employer contributions adding £13,000 and tax relief £4,000. Investment growth makes up the remaining £65,000.

Standard Life calculated that someone starting work at 22 on a £25,000 salary and making minimum auto-enrolment contributions could build a retirement fund of around £210,000 by age 68, adjusted for inflation. Delaying contributions until age 27 could reduce the pot to around £170,000, assuming 5% annual investment growth.

Jenny Holt, customer savings and investment director at Standard Life, said: "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. Contributions are important, but the real benefit often comes from giving those contributions time to grow and generate returns over decades. This is why starting early can make such a difference."

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