Recent research has shown that most young people, those between 22 and 29, do not adequately consider retirement planning until they have been in work for several years. Only 34% of men and 38% of women in this age bracket belong to an employer pension scheme, and the numbers signing up are dropping as the financial worries of the here and now take over.
Pension Trends, which draws together figures from the Office for National Statistics, published a report in September 2010 which revealed that over half of single pensioners in the UK have an income below £10,000 pa, while around 8 million workers have no pension provision and will rely solely on the state pension and benefits during their retirement. That’s an income of around £5,000 pa.
Between them the figures paint a daunting picture and underline the need to discuss your long-term financial planning early to secure a comfortable retirement. The issues raised by the data are ones that Steve Webb, Pensions Minister is hoping that NEST will address when it comes into play in 2012.
However, critics of the scheme are suggesting that it induces a false sense of security, with people believing their pension is taken care of for them, rather than taking an active role in their own retirement planning.
Another incentive to save early is that it can leave you better off than saving large amounts later in life, thanks to Compound Interest, where interest is added on top of interest you have already earned. The cumulative effect of this can dramatically enhance your pension pot. The flip-side to this is that many pensions are based on the success of investments and do not guarantee a set level of interest.
While the figures seem scary, it’s easy to avoid making yourself one of them. With forward planning and a sensible approach you can look forward to a comfortable retirement.