BRITAIN’S young savers are wildly underestimating how much they need to save each month for a comfortable retirement, after a national survey found just one in 10 is putting money aside for a pension – despite having high expectations for their final pension pots.
Just 12 per cent of Britons between 25-34 years old are saving for retirement, even though one third hope to retire on £30,000 a year, some £4,000 above the average salary.
This is equivalent to a typical 35- year-old funnelling £750 a month into a pension pot, or a 25-year-old putting away £400 a month for retirement.
The mismatch in expectations will fuel fears that millions of Britain’s young people, starved of generous defined benefit pension schemes and saddled with high debts and soaring house prices, will retire in poverty.
The survey, conducted by YouGov, found 25-34-year-olds were the thriftiest generation in the UK, with 18 per saving money from their disposable income, but for more near-term aims such as houses, holidays and cars instead of retirement.
Tony Stenning, UK head of retail at the world’s biggest fund manager BlackRock, which commissioned the survey, said: “You really can’t build your future in the future... The stark reality is that putting something aside for old age has become a necessity.”
The dangers of not saving soon enough are apparent after figures show a 35-year-old would have to save twice as much as a 25-year-old to be able to retire with a £600,000 pension pot, enough to buy a £30,000 a year pension.
The government is currently attempting to solve the savings challenge by introducing a law making it compulsory for workers to be enrolled into a pension. However, at the current auto-enrolment saving rate of two per cent, a typical worker will only be saving roughly £44 a month – hundreds of pounds short of what they want.
National Association of Pension Funds chief executive Joanne Segars said: “Young people have a lot on their plates and face great financial pressures like student debt or saving for their first home, but they should still think about a pension. An early start can make a big difference.”