By diverting savings from Christmas presents each year, people could boost their pension by thousands of pounds, experts say
Savers could see a significant boost to their retirement savings by making a small change to their Christmas spending, analysis has revealed.
Christmas is famously an expensive time of year, with households expected to spend around £300 on gifts, according to research by YouGov – not to mention the cost of food and festive activities.
But a simple decision to divert part of that spending into a pension could add tens of thousands of pounds to a retirement pot over time.
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Analysis by AJ Bell shows that if someone were to redirect some of their Christmas budget into their pension each year, the long-term impact could be substantial.
A 25-year-old who starts now – and adds to their existing pension funds – could see their pot grow by £61,440 with an additional £257 annual contribution, or £81,282 if they put in £340 each year.
The benefits remain significant even for those starting later. At age 35, the same £257 contribution could add £32,387 to a pension pot, rising to £42,846 with the higher £340 amount.
Even starting at 45, a gift-sized contribution of £257 could boost a pension by £15,508, and £340 could add £20,517.
For those starting at 55 – which is just 11 years away from retirement age – the figures still show a meaningful increase, with £5,932 or £7,848 added by age 66, depending on the annual contribution.
Rachel Vahey, head of public policy at the firm, said saving for retirement can often by “overlooked”, but diverting some of the money set aside for gifting can often be a good idea.
Speaking to The i Paper, she said: “Redirecting half of the money spent on gifting each year can mean adding a very welcome boost to your overall retirement pot.
“For a 25-year-old, that could mean a staggering additional £61,000. This clearly shows little financial decisions can make a big difference to your overall later financial life.
“Think about it as giving your future self a nice little Christmas present to enjoy in the years to come.”
The figures assume 20 per cent tax relief, 5 per cent investment growth after charges, and 2 per cent annual inflation on the gift allowance.
Experts highlight the power of starting early as even relatively small annual contributions, equivalent to a moderate Christmas gift, can grow significantly over decades.
Pensions UK recently updated its retirement lifestyle standards, showing that a “comfortable” retirement now costs £43,900 a year for a single person and £60,600 for a couple.
This is up from £43,100 for a single person and to £59,000 for a two-person household.
It defines “comfortable” as being able to spend £75 a week on food, £42 a week on good out of the home, a two-week four-star holiday in the Med with around £100 per person spending money and three long weekend breaks in the UK a year, as well as around £1,500 per person for clothing and footwear each year.
For those who spend less on Christmas, whatever you can put aside throughout the year towards your pension pot will still help your retirement funds in the long run.
And those who can contribute more will see an even bigger lift to their existing pot.
How to boost your pension pot
Claire Exley, head of financial advice and guidance at JP Morgan Personal Investing, said it is important that younger savers contribute to a pension or take advantage of employer-matched contributions now to guard against any future shortfalls.
She explained: “If the state pension still exists and has kept pace with inflation – your future self will still be pleased you put away ample for your retirement.
“As with most things finance related, some early planning can ensure you have more options in the future, so whatever happens to the state pension, getting some guidance and advice on what you can do now is a good first step.”
Another step to consider if you’re 66 is to defer your state pension. For every nine weeks you defer, you will get an extra 1 per cent, and if you defer for a full year, this works out as 5.8 per cent extra.
Whether this works out as beneficial in the long-term depends on how long you live for.
To receive the full state pension, you typically need 35 qualifying years of national insurance (NI) contributions. These can be received by paying NI via work, or receiving certain benefits.
If you have a gap in your record, you can also pay to receive extra years.
You need at least 10 “qualifying years” to get some form of state pension.
You can check your NI record on the Government website to see how many you have and you can pay voluntary contributions for the past six years. The deadline is 5 April each year.
The cost depends on the tax year you’re paying for, and you can apply online on the Government website.
But before paying to fill any gaps in your state pension, experts say you should check if you can do so for free.
How to manage your spending at Christmas
Plan before you spend
Start by making a budget. Check your bank statements for last December to see how much you actually spent in 2025, break it down, and don’t be afraid to adjust your spending to the size of your budget. Far better to do this than wake up in the new year with a financial hangover.
Keep track of your spending
Once you’ve set a budget, keeping track of your spending, using a notebook, app or excel spreadsheet on your laptop, means you’re less likely to overspend.
Consider a Secret Santa
If you’ve got a lot of people to buy for, such as extended family and friend groups, suggesting a Secret Santa is a great way to keep costs down.
Be smart about delivery
Book your slot. If you’re planning a supermarket delivery close to Christmas, bag a cheaper time slot by placing just a few items in your virtual trolley well ahead of time.
Add discounts automatically
Use browser extensions to keep a constant eye out for the cheapest prices for you. There are plenty of options like Rakuten, The Camelizer, and VoucherCodes “DealFinder”.