Britons could boost their pension pots by up to £50,000 thanks to the recently announced cut to National Insurance, according to experts.
Earlier this month, Chancellor Jeremy Hunt confirmed the tax's rate would be slashed from 10 per cent to eight per cent for employees, and to six per cent for the self-employed, from next month.
With this reduction to the National Insurance rate, workers are set to save even more money from their pay cheques which is useful amid the cost of living crisis.
However, for those who can afford it, putting the savings into pension pots instead could help in preparing for retirement.
According to Hargreaves Lansdown, an employee earning £30,000 a year could have £349 extra in savings annually, while individuals on salaries of £40,000 and £50,000 are expected to save an additional £549 and £749, respectively.
Helen Morrisey, the head of retirement analysis at Hargreaves Lansdown, highlighted how this offers pension savers the perfect opportunity to boost their retirement income.
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Savers could use the pending tax cut to bolster their retirement income
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She explained: "At a time when people’s finances have been put through the wringer, the extra cash can put some much-needed headroom in day-to-day budgets.
"However, there is a way this cut can have a more lasting impact."
According to the expert, savers should consider putting this cash away in a self-invested personal pension to prepare for life post-work.
Currently, a 30-year-old who makes £30,000 a year and contributed the minimum auto-enrolment pension contribution at eight per cent could have a pension pot of £155,000 by the time they retire at 68.
If the same worker were to invest the savings they have made through the National Insurance cut, their pension pot amount could rise to £177,000.
This is the equivalent of putting an extra £29 a month into retirement savings, and more money can be earned if someone is on a higher salary.
Ms Morrisey added: "If the same 30-year-old was earning £40,000 a year, they could have a pension of around £207,000 if they contributed at auto-enrolment minimum levels until age 68.
"However, putting the extra £549 a year into their pension could see it swell by around £35,000 to £242,000.
"If you earned £50,000 a year, the extra money contributed from the two-percentage point cut in National Insurance could see your pension surge by almost £50,000, from £258,000 to £306,000."
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Retirement savings could "surge" by £50,000 via the National Insurance cut
GETTYThese figures are based on an individual contributing five per cent of gross salary and the employer contributing three per cent until age 68, with investment returns of five per cent a year and fees of one per cent.
Investors are also reminded that "returns are never guaranteed".
This is because any amount received will depend on the performance of the investments someone chooses.
The two per cent cut to the National Insurance rate will come into effect from April 2024.