28th October 2015 at 4:00pm
Did you know that the cost of retirement is set to increase by as much as 150% by the year 2050?
That’s quite a worrying prospect for many – especially for the one in three 30 to 40-year-olds who haven’t even started saving into a pension.
Are you saving enough?
According to a recent report from The Centre for Economics and Business Research (CeBR), by 2050 pensioners are expected to spend more than double the amount of today’s retirees if they want to maintain their current standard of living. They say that if you’re 35 years old today and you want to secure a decent retirement income, you’d need to build up a fund of over half a million. These figures are based on the cost of essentials like housing, food, heating, transport and a few of life’s little luxuries.
Although this seems like a huge sum of money, the good news is everyone’s different so you may not need a pot quite so large. And remember, you’ll get some support towards this from the State Pension too.
What does the research tell us about today’s 30 to 40-year-olds?
- Their average pot is currently around £14,000
- They’re not all saving – only 60 % of 30 to 40-year-olds who were surveyed actually have a pension in place
- They’re not all able to save – 54% of thirtysomethings who aren’t saving into a pension say they can’t afford to
- 40% of under-40s predict there won’t even be a state pension by 2050.
Getting to grips with pensions
According to a spokeswoman from Department for Work and Pension (DWP), they know that a lot of people aren’t saving enough to sustain their current standard of living in retirement. For that reason the government introduced auto-enrolment, helping more people save for later life through a pension scheme at work, and just six months ago the hotly-anticipated pension freedoms were implemented. Both make pension saving easier and clearer and are helping to change Britain’s approach to long-term saving.
The pension freedoms offer much more flexibility and choice over how you can take your cash in retirement so no matter what age you are it’s time to get to grips with pensions so you can take advantage of the new rules.
Remember, the sooner you start paying into your pension the more time and opportunity your money will have to grow. And small amounts can really add up over the long term.
The good news
Many current retirees didn’t start paying into a pension until they were in their 30s and the average age nowadays is 27. That gives today’s savers, on average, more time to build up their pension savings. And in some cases a monthly savings habit may have already been started for you under the auto-enrolment rules. If you fall into this bracket, you’ll generally be paying up to 4% of your salary into a pension by 2018 and your employer will be paying in up to 3%, too. The tax man then tops this up with tax relief, giving you a great head start.
Time to start saving
There’s no denying it’s more important than ever to start saving for the retirement you want. If you’re one of the thirtysomethings who hasn’t got round to saving yet – don’t panic but start saving today so you can enjoy your retirement when it comes around.