Lack of savings creating ?live fast, die poor? generation
Young people must change their saving habits to avoid financial struggles in older age, Minister for Pensions Reform, James Purnell has warned. 3.7 million people aged 26-35 are either under-saving, or not saving at all. And with twenty-and thirty-somethings expected to live significantly longer than the generations before them, many are risking living in poverty during retirement. The consequences of young workers paying less into pension funds during their working lives will be felt unless they are encouraged to contribute as early as possible, as the length of retirement today increases to 20 years for the average person from ten years in 1950. “At the moment young people are acting as if they expect to be able to fund a longer and longer retirement with less and less saving,” said Mr Purnell. “It is striking how fast time spent in retirement is lengthening. In 1950, the average retirement lasted about ten years. Today it’s around twenty. In 2050, if we didn’t increase the State Pension Age, it would be around twenty-five years.“Since 2000, the number of 20-29 year old who contribute to a private pension has fallen from one in three to one in four. In contrast, figures for their parents’ generation remained unchanged over the same period. A person saving around £10 per week from age 22, with constant lifetime earnings of £19,000, could expect to retire at 68 with a pension fund worth around £69,000 in today’s earnings terms. If they delayed starting to save until age 30, their pension pot would reduce to £55,000 - and if they delayed until age 40, it would go down to £38,000.
This was posted in Bdaily's Members' News section by Ruth Mitchell .