Do you have a private pension? If so, are you actively saving into it? Hopefully the answer is yes to both, as we're all increasingly being reminded of the importance of saving for later life. Happily, that message seems to be getting through to people, and perhaps surprisingly, it's the younger generation that's leading the way.
Younger workers more likely to save
According to research from Friends Life, younger people are far more likely to save into a pension than their older counterparts. The study found that, of the 10% of 18-24 year-olds who have a pension, all are contributing to their fund – so even though there's still a way to go to get more people signed up, those that already have a pension really take it seriously.
This is in stark contrast to the older age groups. Of those aged 35-44 years old who have a pension, 14% are not contributing anything at all, a figure that rises to 17% of those aged 45-54 and 23% of those aged 55+. This savings inertia is particularly worrying given that these are the age groups who will need to access their cash sooner, and if they don't have enough in the pot, it'll be difficult to bring it up to scratch before retirement.
Nonetheless, it's good news for younger savers, as the figures suggest that younger people are becoming more realistic about their income requirements in later life – arguably helped by auto-enrolment, which could see the trend continuing – even if older workers aren't.
Andy Briggs, group chief executive at Friends Life, commented on the findings: "I am heartened by our research, which shows people taking steps early to secure their future by saving into a pension. Auto-enrolment will mean more people from a younger age are encouraged and supported to start saving, so I expect to see this trend in savings behaviour accelerate.
"However, our research suggests that with age comes saving inertia, which may be a result of other priorities taking over, such as saving for weddings and spending money on children. Younger people need to harness their savings potential to kick-start their retirement plans, [as] putting savings plans in place early will ensure more people can secure a retirement they aspire to."
Make the most of auto-enrolment
Have you got a pension yet? If not, it's time to follow in the footsteps of your peers and get signed up. Saving sufficiently is the only way to ensure you'll be able to enjoy the comfortable retirement you're hoping for, and with auto-enrolment still being rolled out to companies, it's hoped that more people will take the plunge.
Then comes the next step – actually saving into your pension! You'll want to make at least the minimum contribution, ideally more, and try to resist the temptation of opting out – you may crave the extra money, but you could crave it even more in retirement.
That's why it's so important to be realistic and really think about the income you'll have when you retire. Unfortunately, a lot of people still overestimate how much they're likely to receive, with the average 18 to 24-year-old expecting an annual retirement income of £17,440. This, according to Friends Life's calculations, would leave them with a potential financial shortfall of £4,840.21 per year, which rises to £6,489 among those aged 45-54 who expect an annual income of £18,474.
Of course, this is just the average, and if you want to achieve that kind of income there's no reason you can't get there – as long as you save! Make a plan to work out how much you want in retirement and how much you'll need to contribute to your pension in order to reach your goals, and ideally talk to a financial adviser to help. You'll probably want to utilise other savings vehicles as well, particularly cash ISAs, and if you start early and get saving, you could have the retirement you're hoping for.
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.
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