More people thinking of saving for a pension

The number of people who say they're saving for a pension has shown a significant rise compared to this time last year, according to figures in the latest MoneyMood Survey from Legal & General.

In 2009 1 in 5 respondents (20 per cent) said they were thinking of saving for a pension. Whereas this year the figures show that almost 1 in 3 (32 per cent) people say they're thinking of saving for a pension.

The percentage of men who say they are thinking of saving for a pension has doubled to 40 per cent (21 per cent in 2009). This is a marked increase and accounts for the lion's share of the overall rise as the figure for women has not risen significantly - up to 25 per cent from 20 per cent last year.

Perhaps it's not surprising that the increase is accounted for by the 25 to 64 age group with under 24s and over 65s showing a decline year on year.

Commenting on these findings, Claire Evans, Legal & General Unit Trusts Marketing Director said, 'It is encouraging to see such a healthy rise this year in the number of people thinking about saving for their long-term retirement income, particularly in the younger age groups. We all appreciate the importance of starting saving as early as possible. I can't stress highly enough that the sooner we start saving the better, as your money has longer to enjoy investment growth. With the increase in ISA allowances across all ages from April 6 there are now more opportunities to save for the long term. Money saved in stocks and shares ISAs can be used to invest in a pension later in life with the continued potential to benefit from generous tax allowances from the Government. The tax relief on pension contributions could boost the amount paid in to your pension by 20 per cent for basic rate income tax payers."

Claire added: "With savers now able to put up to £10,200 per year in a stocks and shares ISA, there is more scope than ever to save for a rainy day and for the long term with an ISA, while ensuring you can access your money easily when you need it. So someone paying monthly amounts into an ISA up to the maximum ISA allowance (from April this year until April 2020) would have a total ISA pot of £141,000 (after charges have been deducted).  If this was invested into a pension (in April 2020) a basic rate taxpayer would see the value of their savings rise to around £176,000 after being boosted by the government's tax relief on pension contributions. That in itself could provide a tax free lump sum of £44,000 and buy a retirement income of £8,600 per year.

When you are 25 or 30, retirement seems like a long time away but if people begin to save even a relatively modest amount they can look forward to a much more comfortable retirement.  Saving enough for a comfortable income from your pension can appear expensive as you may need to provide income for a long time after you retire. By starting saving early you can perhaps avoid the need to have to pay larger sums in later years, or have to keep working later in life, just to retain a reasonable quality of life when you do give up work.

Figures from Legal & General show that to achieve a pension income at age 65 of £20,000 a year starting today at age 30, requires monthly premiums of £234. However, delaying paying into a pension until age 40 means that monthly payments have to double to £470.  Adding up the contributions payable over the working lifetime reveals the extra investment required to be £42,720 as a result of this delay."

For those seeking guidance, information or possible solutions to planning their financial future, visit our website at legalandgeneral.com or seek independent financial advice.