In our recent blog post, which you can read here, we briefly touched upon young people’s attitudes towards pensions, and how little attention is paid towards their funds so early on in their professional lives. With the introduction of auto-enrolment, this has forced those in their twenties into contributing towards their pension funds with an initial minimum contribution of 1% of their salary, which will be matched by the employer’s contribution of 1%.
However, a minimum is just that – minimum. According to Prudential, less than half of those under 30 are paying more than the minimum contribution towards their pension fund. And this is a big worry. Today’s young people should pay no attention towards a minimum contribution, rather the maximum they can realistically afford to be putting aside.
There’s no denying it, those in their 20’s and 30’s are hard done by. Student debts, rising rent prices and the impossibility of saving for a mortgage similar to their parents and grandparents are not made easier by rising state pension age. Considering those of us in our twenties face the prospect of not being able to collect the state pension until we are 70, upping contributions beyond the minimum now will cushion the blow without getting into a panic in later years when it is too late. However, this needn’t be a daunting task. Gradually upping AE contributions above the minimum can be done by simple adjustments to lifestyle habits. Coffee stops before work, for example, they add up! By simply foregoing a daily Starbucks fix every working day could see you save almost £30,000 in the span of 30 years.
So young people, think of AE as a blessing, not a curse. Getting into the habit of going beyond the minimum AE contribution now will lead you towards a prosperous retirement as a golden-ager!