According to IFA Magazine, some one-off pension contributions in March 2026 reached up to 4.4 times higher than the monthly average for the rest of the tax year.

Those making large, last-minute contributions did so to maximise their Annual Allowance before tax year end. However, the data suggests that consistently waiting until the end of the tax year could see you miss out on a significant sum, compared to making full use of the Annual Allowance earlier in the tax year.

Keep reading to learn how reorganising your contributions could help you leverage the benefits of compound growth and pound cost averaging.

Contributing a lump sum at the start of the tax year allows longer for your money to benefit from compound growth

Emphasis is often placed on making the most of annual efficiencies before the end of the tax year.

However, shifting to a proactive mindset and making the most of allowances on the first day of the new tax year (if you can afford to) offers greater opportunity for compound growth.

Compound growth refers to growth on both your initial investment and the accumulated returns on that investment. This “growth on growth” creates a snowball effect.

By contributing at the start of the tax year, your money has longer exposure to the markets and more opportunity for growth.

Below is a side-by-side comparison of the value of your pension investments if you contributed £10,000 annually at the start of the tax year compared to tax year end.

While the benefits of contributing earlier only yielded £500 in the first year, this gap had grown to £23,864 by year 25.

Please note that these figures are only illustrations and are based on a fixed rate of growth. In reality, growth is likely to fluctuate over time, and the value of your pension wealth may be more or less than the example.

Contributing regularly could help you achieve stable, long-term growth through pound cost averaging

It’s not always feasible to contribute your entire annual pension savings at once, particularly if you receive regular salaried income.

In this case, pound cost averaging could help you build tax-efficient pension wealth through regular payments made throughout the year rather than individual, lump-sum payments. This can make pension saving manageable while also allowing you to take advantage of pension tax relief.

It is also a more risk-averse strategy. By investing a fixed amount each month, you buy fewer shares when prices are high, and more when they are low, smoothing out the price of your investment and protecting you against the risk of market timing – for example, being forced to invest a large amount in March, even if markets are volatile.

The following is an example of the value of pound cost averaging during a period of market volatility.

Source: Royal London

While pound cost averaging is useful in blunting the sting of market volatility, you are less likely to benefit from a bull market – where stock values rise for an extended period of time – compared to if you had invested a lump sum earlier on.

On the other hand, you protect yourself if markets face a sustained period of instability.

The Pension Planner can help you build a pension savings strategy that works for you

Lump sum investing at the start of the tax year and regular investing throughout the year are both examples of small proactive changes that could significantly increase your pension wealth over time.

However, which is best suited to you is entirely dependent on your personal circumstances, attitude to risk, and goals.

For example, if you are self-employed and your income is irregular, you might prefer lump-sum investing as it puts less pressure on your monthly income to fund your pension.

Conversely, if you are concerned about how a sustained period of global uncertainty (like the current events in the Middle East) might impact your returns, pound cost averaging can provide peace of mind, as your investment cost is smoothed over time.

If you need help deciding which strategy fits best within your financial plan, we can help. Reach out to a member of The Pension Planner team today by emailing info@thepensionplanner.co.uk or calling 0800 0787 182.

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.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.