Pensions have been squarely in the spotlight over the last few years, but some people are still unaware of the importance of preparation – and there are even divisions when it comes to options over how you should get ready for retirement.
Research from retiresavvy.co.uk has uncovered a notable divide in the nation's opinions in how the next generation of younger workers should prepare for retirement, with their advice not always being definitive.
However, the need to prepare is clear – the report noted that younger workers could be the first generation to face worse retirement prospects than their parents, yet despite this, many are unfazed. In fact, 38% of 18-24 year-olds surveyed believe that they'll be able to have the lifestyle they want in retirement, despite the fact that only 21% are taking the necessary steps to prepare.
Estimates suggests that today's 20-somethings will need to amass a pension pot worth in excess of half a million pounds if they're to achieve the retirement they want, which is a daunting task for anyone – but even more so when the advice on how to do that is mixed.
For example, the research found that, although 41% of survey respondents felt it was important for the younger generation to save for their future, 14% thought they should be saving for a pension at all, believing that they were a 'rip off' and a 'waste of money'. Instead, 21% would advise younger workers to invest in other things like property.
Even those who agreed with pension saving felt that the bare minimum would suffice: just 24% agreed that younger workers should be contributing more than the auto-enrolment minimum to their pension pot, and even then, not at the expense of things like student debt and housing costs.
Andrew Sheen, of retiresavvy.co.uk, commented on the findings: "Being able to afford a happy retirement is a rapidly growing concern for society; people are living longer and will need more money for later life. A lot of younger workers are struggling to see past their immediate financial commitments of student debt, getting onto the property ladder and starting a family. As much as they might want to think about the long term, they just feel they have too many pressures to be able to do anything.
"However, the best solution is for them not to put their head in the sand when it comes to thinking about later life. There are ways in which young workers, who are struggling to cope with low wages, student debt and trying to get a leg-up on the property ladder, can actually start to make small changes that will make a big difference to their future. Even just being aware of all the options that are available to them can have an impact, and pensions are a part of this."
While some financial matters will take priority at a younger age, it's still vital to prepare for your future. Even putting a small amount into a pension pot can add up – enrolling into a workplace pension scheme in your 20s will mean you have at least three decades of dedicated pension saving ahead of you, and in that time, even small contributions can make a difference.
If you can, it could be worth thinking about increasing your minimum contribution, such as by making cutbacks to your lifestyle. Again, it needn't take much – even skipping the daily shop-bought coffee or foregoing a takeaway now and then can add up to hundreds of extra pounds over the year, and if you put that money into your pension, you won't be tempted to fritter away the cash elsewhere.
Of course, you may want to look into other savings vehicles rather than putting all your eggs in one basket, and as long as you earmark one of your pots for the future, you could build up a nice sum over the years. ISAs can be ideal for this purpose, so start comparing ISA rates and watch your savings grow.
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