Delaying pension payments a costly business - Pensions - News - Moneyfacts

News News brings you the latest financial & economic news & reviews of the best products in the UK by our team of money experts.

Delaying pension payments a costly business

Delaying pension payments a costly business

Category: Pensions

Updated: 30/09/2009
First Published: 30/09/2009

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Workers who choose not to start building up a pension pot until they reach middle age are risking a significant shortfall when they retire.

Britons keen to build up a retirement nest egg equivalent to two thirds salary who do not start contributing until aged 40 will need to save 33 per cent of their wage until aged 65.

On the average salary of £26,020, a 40 year old beginning a pension would need to save £23.94 a day, or £728.06 a month, from combined employee and employer contributions.

Employees have been advised by Prudential, which conducted the study, to start saving much earlier to ease the monthly pension payments.

Starting a defined contribution scheme at 18, a worker would have to put aside just 12.9 per cent of the average wage a day to build up a retirement fund that equates to an income of £17,347, which is two thirds average UK salary.

Savers have been warned that current levels of pension savings – just £3.56 a day – will prove to be insufficient come retirement.

"With the basic state pension currently paying out less than £5,000 a year, it is critical that people get themselves out of the mindset that they will be able to rely solely on the state to look after them financially in their retirement," said Martyn Bogira, director of defined contribution solutions at Prudential.

"There is a shifting onus on workers to begin budgeting a more realistic amount which can be paid into a pension, especially if they want to improve their chance of being able to enjoy a reasonable quality of life when they do come to retire."

A study carried out late last year found that 22 per cent of people planning to retire this year said they had no pension savings and expected to rely on the state and other savings.

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

Related Articles

Have you lost track of your pensions?

The changing nature of the jobs market means it’s highly likely that you’ve got more than one pension pot, but the question is, do you know where they all are? According to research from Aegon, many people don’t.

Grandparents missing out on pension protection

Grandparents who give up work to take care of their grandchildren could be missing out on valuable state pension rights. So, if you're a grandparent taking care of a little one, make sure you’re building up all of the pension that you deserve.

Setting goals could boost your pension pot by £30K

Setting goals can be the key to success in many areas of life, helping motivate you to achieve anything from career progression to building up that house deposit - and if you have goals set for retirement, you could boost your pension by £30,000.