I’m 20 and I have a pension… so?

Happy young people outdoors thinking about pension

Financial Procrastination

MoneyPlus Features Team

19th January 2017 at 4:00pm

Lauren Tragis, one of our marketing trainees, shows wisdom beyond her years. Her latest blog looks at the importance of saving into a pension as soon as you can.

Why put off what you can do today?

‘I saw an interesting photo the other day and I couldn’t stop thinking about it. It was a cool image of an old lady at a gig surrounded by young people. It showed everyone around her busily filming or taking photos with their phones – either to look at later or share on social media – she was the only one simply enjoying the event. Just being there. Living in the moment.

You might think this is an argument for doing just that. After all, isn’t mindfulness – experiencing the ‘here and now’ rather than the past or the future – a big trend at the moment? In other words, why save for the future when you don’t know what it will be?

But the photo tells a different story to me. It says, if you want to ‘be present’ all your life and enjoy things like gigs (which, as we all know, don’t come cheap), you need to have money saved for those moments. Which is why, aged 20, I have a pension.

I’m not the only one amongst my friends, but I’m certainly the exception rather than the rule. Some of my peers have a pension but they have no idea how much they pay in to it, or how it works: their employer has just opted them in. Which, admittedly, is better than nothing. But if you don’t know where your money is going, the chances are you don’t understand how much needs to be saved to live a comfortable life once you’ve retired.

When I ask my friends why they aren’t saving for retirement they look at me as if I’ve just told them I like Kanye West (I don’t). The first excuse I hear is ‘But what if I die before I retire?’. Well, that’s a fair point. But the odds are stacked well in favour of surviving: a mind-blowing one in three of those born in 2013 will live to celebrate their 100th birthday. So I tend to reply to that one with – ‘What if you don’t?’

The second most popular response is, ‘Isn’t that what the state pension is for?’. Another good point, but the state pension is no longer something that can be relied on alone to provide a comfortable standard of living – it pays out a maximum of just £115.95 a week. Does that sound like enough to buy gig tickets, once you’ve bought food, clothes, gas and electricity…?

Financial Procrastinators

And then I get the procrastinators. They see my point, but they think it can wait. ‘I’m only 20, I’ll pay into my pension when I’m older’, they say. But research shows that to meet aspirations, a 30-year-old would need to save £12,000 a year, or £1,000 per month every year until retirement. So surely it’s better to start now?

These days, young people (and I’m proud to say I’m one of them) spend money for the sake of spending money (and I’m proud to say I don’t). It’s worrying how little they’re prepared to look ahead, and understand that when we reach retirement, our needs will still be the same when it comes to the essentials in life – yet there’s no thought of where the money will come from to pay for these things.

Attitude Shift

There needs to be a big shift in attitude or we will have an entire generation with no money, and no way to stop working. Which will be bad news for the economy. Maybe saving will need to become compulsory: Australia introduced such a system in 1999, where employers are required to put in 9% of staff salary (due to increase to 12 per cent by 2020). The result? Young people are more engaged with saving and don’t just assume they can rely on the state when they reach old age.

I’m 20 and I have a pension. I’m not going to use it as a chat-up line but it doesn’t make me boring, and I’m certainly not ashamed. Because the fact is, out of all my friends, the old lady in the picture in 50 years time is more likely to be me – as I’m the only one who will be able to afford to pay for the gig tickets…’

The world is your oyster

The fact that people of the same age as Lauren are not only thinking about their future but actively taking steps to prepare for it is extremely positive.

We all know it’s hard to think about retirement when it seems so far away especially when there are so many fun things to spend your money on in the ‘here and now’ but we hope Lauren has inspired you to at least save a little now – it could go a long way towards acquiring those coveted gig tickets and much more.

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The information in this blog or any response to comments should not be regarded as financial advice. A personal pension is an investment and its value can go up or down and may be worth less than you paid in. Laws and tax rules may change in the future. The information here is based on our understanding in April 2016.