Urgency for younger generations to access improved financial education
The chasm between generations regarding retirement prospects is glaringly apparent, as 78% of individuals believe their predecessors had more favourable pension plans or brighter retirement futures. According to recent research, this data highlights a stark revelation that underscores the urgency for younger generations to access improved financial education[1].
This will help address the inequitable distribution of retirement benefits across different generations, particularly considering that 38% of UK residents started contributing to their pensions when they were at least 35 years old.
Sacrifices and aspirations
A staggering 51% of respondents indicated a willingness to forfeit significant life goals or dreams to increase contributions towards their pension funds. Furthermore, 66% of participants expressed a longing for travel during retirement. These findings highlight the crucial role of financial planning in achieving these aspirations and the discrepancy between expectations and reality.
The importance of financial education
There might be nothing ‘cool’ about pensions for younger people today, but they’re an essential financial safety net and must be part of financial education. This education can occur at home, school, or work to aid individuals in making informed decisions that will yield benefits when needed.
Time and money are a powerful combination
The benefits of saving early are significant. For instance, a pound saved by someone in their twenties can carry four times as much purchasing power as a pound saved by someone in their fifties. So, while there is always time to start saving, the earlier, the better.
Embracing government initiatives
Recent government plans that aim to enhance pension savings include extending the employer pension scheme auto-enrolment (AE) to employees from the age of 18 down from the current age of 22. Plus, the lower earnings limit of £10,000 is set to be removed.
A lifeline for young workers
These changes could significantly benefit the youngest workers, especially those in lower-earning groups. They could see their pension pots boosted by an impressive 150% by starting to save from their first earned pound.
Bridging the retirement gap
For individuals with a median private pension income of £13,400, this 150% boost could mean an increase to £20,100 per year. This results in improved retirement outcomes, mainly for disadvantaged groups, such as women, disabled people, and ethnic minority groups.
The power of starting early
Eliminating the lower age limit could enable an average 18-year-old worker to boost their pension pot by £5,000 by retirement. According to the Office for National Statistics (ONS), an 18-to-22-year-old earning an average of £12,000 who starts saving at 18 could retire with £136,000 in their pension. This is £5,000 more than someone who only starts saving at 22.
Source data:
[1] Research carried out online by Research Without Barriers – RWB on behalf of Scottish Widows. All surveys were conducted between 3rd October 2023 and 4th October 2023. The sample comprised 1,045 UK adults who have not yet retired. All research adhered to the ESOMAR & UK Market Research Society (MRS) code of conduct (2023). RWB is registered with the Information Commissioner’s Office and complies with the DPA (2018). All other data was taken from the Scottish Widows 2023 Retirement Report – which surveyed more than 5,000 people in the UK.
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