Waiting until 2012 to save for retirement could leave you £100k worse off

People who wait just two years for the introduction of the Government's compulsory pension scheme to start saving for retirement could find themselves significantly worse off, analysis from Fidelity Investment Managers shows.

Fidelity has calculated that a 25-year-old who puts away £300 a month, even with a cautious approach to investing, could be £123,000 better off if they start now rather than wait until 2012. Even those who can invest a more modest £100 a month could end up with £41,000 more when they reach 65.

NEST (National Employment Savings Trust) is the Government's pension scheme due to be introduced from October 2012. While the final details are currently under review, the Coalition government has said it is committed to auto-enrolment which will provide millions of Britons a workplace retirement savings scheme for the first time.

However, anyone who has the opportunity to start saving now but who decides to defer until they are compelled to do so could find two years makes a big different to the size of their retirement pot.

Julian Webb, Head of UK Defined Contribution at Fidelity Investment Managers, says, "The Government's new pension scheme, known as NEST, will see a big shake up for both companies and employees but a real concern is the prospect of people sitting back until they are compelled to save - especially when many may be tightening their belts because of the uncertain economic outlook.

"Starting early simply gives people the opportunity to build a bigger pot by retirement - it also puts people in a better position to recover from falls in stock markets and interest rates. I'd suggest anyone with access to a company pension scheme but who decided not to join should reconsider that decision now.

"Sometimes it helps to remember that company pensions usually include free money. With the average employer contributing 6.1% of gross salary to a private pension scheme, anyone on the average wage of £25,428 could get, free, an extra £129 a month. If they choose to add in their own money as well then the Government will bump this up with tax relief."