Pension saving is a top priority for a quarter of Brits
Nearly one in four Brits (22%) say saving for a pension is one of their top financial priorities, according to research by Alliance Trust Savings Limited, the financial services company.But the research reveals that throughout their lives, people have different financial priorities and saving for a pension is not foremost in most people’s minds. Despite regular industry calls for people to invest in a pension as early as they can, Alliance Trust says this needn’t be the case. With new flexibility rules on pensions, Brits can afford to consider their savings and investments in stages.
In their 20s, people are more preoccupied with saving up as much as they can, either to buy a home (30%) or for specific purchases (32%). One in six (17%) also start to put money aside for their pension. When they reach the prime of their working lives – 30 to 50 years old – people concentrate on paying off the mortgage (54%), investing for their children’s future (21%) and more people consider saving for their pension (27%) as a top financial priority. Those over 50 years old are also saving for their retirement (19%), looking to protect themselves financially against ill health or death (13%) and start planning their inheritance (14%)
Hyman Wolanski, Head of Pensions at Alliance Trust, said: “Not everyone has to start saving into a pension scheme as soon as they can, contrary to popular belief. A pension has clear tax advantages but will not be right for many younger people struggling to juggle their debts, day-to-day living costs and what to do with any remaining disposable income. These people often require more flexibility than a pension can offer them and simply telling them to lock this money away will put many off taking any action on long-term saving. Greater pensions flexibility brought about in April means more people can consider saving for their future in stages, balancing the differing benefits of pensions and ISAs in terms of flexibility and the tax breaks on offer, as they progress through their working lives.
“It’s important that the long-term savings industry talks a language which reflects the pressures of real life in its calls for greater retirement savings. Yes, it is vital to get into the routine of saving for the long-term early on, but people should look at shifting savings into a pension product once they have established a sufficient safety net of accessible savings, most obviously by taking advantage of ISAs which can then be run alongside your pension fund in later life. The simple message is that people need to save far more for the long-term, however they choose to do this.”
The research also reveals that the most popular financial priority for over half of all Brits (53%) is covering day-to-day expenses with over a third (35%) citing paying off a mortgage. Paying off other non-mortgage borrowing (28%) and saving for specific purchases (27%) were the next most cited financial priorities for Brits.
Overall, saving for a pension is one of the top five financial priorities for Brits. In contrast, one in five Brits (20%) say they have made no pension provision at all. This jumps to nearly half (46%) for those aged 18 to 29. More women than men don’t have any form of pension (23% vs 17%).
Wolanski concluded: “There is a core contingent of people who have made no provision whatsoever for their pension. There seems to be an acceptance among younger people that they need to take retirement saving seriously, but whether this is matched by action remains to be seen..”
Other findings reveal:
Nearly one in six (16%) Brits say they expect to spend less than ten years saving for their retirement.
Women are two and a half more times likely than men to spend less than ten years actively saving for their retirement (22% vs 9%). Alarmingly, this figure rises to 29% of the UK’s over-50s population, while over half (52%) of the under-30s expect to have saved for 30 years or more by the time they retire.
In contrast, 15% of all Brits say they will spend over 40 years actively saving for their retirement and this rises significantly among younger people – a quarter (25%) of those aged 18 to 29 say they will spend over 40 years saving for their old age.