The provider calculated that a contributions gap of 10 years could cost young people £91,600 by the time they get to state pension age.
Aegon looked at the potential losses to the pension fund at a state pension age of 68 for a 22 year-old joining a workplace pension scheme on starting salary of £20,000 and taking a break from contributing for different periods of time.
According to the pension provider, taking a one-year break at age 25 will save the employee £622 from ceasing contributions but could mean losing £7,300 from their total pension fund when they reach age 68.
For that same worker, a break of five years could see them lose £42,100 and a 10-year break could see them lose almost a quarter (£91,600) of the total projected fund value at state pension age.
The total fund value without a break in contributions is calculated at £398,900 at 68 years old and Aegon assumed a future earnings growth of 3.5 per cent, contribution rate of 8 per cent, and a net investment growth of 4.25 per cent.
Steven Cameron, pensions director at Aegon, said: "The recent rise in minimum contribution levels for auto-enrolment may mean some employees are contemplating taking a break from contributing into their workplace pension scheme.
"The temptation may be particularly strong for younger workers, many of which will be paying off student debt and saving for a house deposit.
"Competing demands for money short-term may mean saving for retirement decades into the future is pushed to the bottom of their financial concerns."
But he added: "Opting out of your workplace pension should be avoided wherever possible. While you may increase your take home pay, you’re very likely to lose out on a valuable employer pension contribution.
"Those considering opting out or taking a break should look to see if there are other areas of their lives where they can cut back even if their pension may not feel like a priority. Having gaps in your pension saving history may be something you’ll regret later on in life."
On April 6, 2019 the minimum contribution for workers auto-enrolled in pensions increased from 5 per cent to 8 per cent, with employers paying 3 per cent and workers paying 5 per cent.
Although individuals have the right to opt out of their pension scheme, if they do it is unlikely the employer will continue to contribute.
Kay Ingram, director of public policy at LEBC, said younger savers should bear in mind they may not necessarily be more able to save for their retirement as they get older.
"Pressure on living costs can arise when they start a family and have child care costs to find or have to work part time to juggle family responsibilities. They could also face ill health or redundancy in later life, especially a risk if in a job which could be replaced by technology," Ms Ingram said.
She added: "If they are successful in their career then they could find that even though they can afford to save for retirement that they are restricted to no more than £10,000 a year of savings with tax relief which restricts the pension savings of high earners.
"If the pension scheme is arranged via salary sacrifice the benefits of making pension contributions will also be subsidised by a 12 per cent national insurance saving and graduates with student loans will also save 9 per cent of their pension savings which would otherwise be deducted to pay off their student loan."
From 2012, employees aged between 22 and state pension age and earning more than £10,000 per year are automatically enrolled into a workplace pension scheme.
Aegon’s calculations are based on a 22 year old, having joined a workplace pension in April 2019 on an average graduate salary of £20,000, and opting out of their workplace pension at the age of 25.
Aegon assumed the total contribution rate of 8 per cent for this employee remained fixed until the state pension age of 68.
amy.austin@ft.com
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