Earning? Time to start saving ...

Young people must look to their pensions, says Peter Clifton

Are people in their twenties expected to be older than their years? With the excitement of notching up new achievements every year - the first job, buying a flat, travel - and the sheer fun of being young, stretched and successful, who wants to bother with saving for the future?

Many older people, brought up to believe that a working life stretches to 60 or even 65 years of age, accept that trying to push a 25-year-old into thinking about pensions is pointless and perhaps unnecessary. If so, they are making a mistake.

Unlike previous generations, today's young people are unlikely to work till late in life. Government figures show that the numbers of retired and unemployed over the age of 55 are growing relentlessly. You have less than a 50-50 chance of not being in work after that age. After 60, the odds are heavily stacked against you .

Yet, figures complied by Equitable Life show that a man aged 60 has a remaining life expectancy of 21 years. A woman of 60 will, on average, live for 26 years more. In effect, 30 years' work will have to support almost 30 years in retirement.

This could mean leisure of a quality that your parents can only dream of - provided you start saving early enough. Most people don't: figures published in Insurance Trends, an industry magazine, suggest that only half of the UK male population below the age of 26 saves anything towards a pension.

Stephen Gamble, an independent financial adviser, says: "My experience is that most people don't do anything about pensions until they reach 40. They think that they will then have 25 years to save ... If they leave it to 40 it is far too late - the savings required to retire on half of what they earn now are out of all proportion to their earnings."

Waking up in a sweat at 40 is too late, but even a nightmare at 30 is too tardy a warning. The workers who enjoy a pension offered by their employer are becoming fewer. There is the cold world of the smaller employer with no occupational pension, and, beyond that, a growing new labour market for contract work and self-employment. In this hard soil, pensions just don't grow automatically.

Roland, a 28-year-old contract worker in television, has a personal pension. He knows that few people in his line of business are still working after 50. He should be saving 10 per cent of his income, but does not.

Stephen Gamble says: "Roland is allowed to put 17.5 per cent of his earnings towards his pension at that age, rising on a sliding scale to 40 per cent at age 61. Clearly, because of his shorter working life expectancy, Roland should be putting the maximum towards his pension to stand any chance of having a decent sum at retirement. Every year's delay will prove expensive. It's as stark and simple as that."

Employment trends suggest that, to survive in tomorrow's tougher financial climate, young people should add 10 years to their ages - when planning for retirement, that is.

A common excuse for doing nothing is that pensions, like life itself, are a gamble. But, unlike gamblers, everyone who invests in a pension gets a payout. And in the highly unlikely event that you don't make it across the line, someone else will benefit from your pension.

Here are some steps to take:

l If you have the chance of joining an occupational pension you should jump at it: company or public sector pensions usually include a significant contribution from your employer. Some pay guaranteed benefits at retirement, linked to your final salary. Others invest your money, allowing you to build up a pension "pot" with which to buy a retirement income when you stop work. Talk to your company secretary or pensions office to find out whether there is a scheme you can join.

l If you are in your twenties, phone the Association of British Insurers on 0171 600 3333 for its information pack on pensions. IFA Promotion (0117 971 1177) offers independent pension planning information, and details of advisers near you.

l If you are in your early thirties, you need to be even more active. Follow the same advice as for the under 30, but be aware that you will need to save even more from your income.

l It's important to plan now. Every extra pound will make the last 30 to 40 years of your life infinitely more pleasantn

Start your day with The Independent, sign up for daily news emails
Life and Style
Steve Shaw shows Kate how to get wet behind the ears and how to align her neck
healthSteven Shaw - the 'Buddha of Breaststroke' - applies Alexander Technique to the watery sport
Arts and Entertainment
The sight of a bucking bronco in the shape of a pink penis was too much for Hollywood actor and gay rights supporter Martin Sheen, prompting him to boycott a scene in the TV series Grace and Frankie
footballShirt then goes on sale on Gumtree
Terry Sue-Patt as Benny in the BBC children’s soap ‘Grange Hill’
voicesGrace Dent on Grange Hill and Terry Sue-Patt
Have you tried new the Independent Digital Edition apps?
Arts and Entertainment
Performers drink tea at the Glastonbury festival in 2010
Arts and Entertainment
Twin Peaks stars Joan Chen, Michael Ontkean, Kyle Maclachlan and Piper Laurie
tvName confirmed for third series
Cameron Jerome
footballCanaries beat Boro to gain promotion to the Premier League
Arts and Entertainment
Finacial products from our partners
Property search
Up and away: rates will rise but your mortgage won't escape its moorings with a long-term fix

Is a 10 year mortgage deal a fix too far?

A cut-price deal for a decade-long home loan - where's the problem? Only, says Simon Read, that circumstances can change and it won't be easy to get out
In a surprise move the Tories have decided against putting a career politician into the job. Instead they’ve handed the responsibility to campaigner Ros Altmann

New pensions minister has massive job on her hands

The Tories have appointed campaigner Ros Altmann to the post

Promises, promises: David Cameron talks to staff at Asda's head office in Leeds today

General Election 2015: How you vote next week could affect your finances

Rival party pledges could shrink your savings or grow your nest egg
Logos for the 'Big Six'; energy companies (top row from left) British Gas, EDF, RWE npower, (bottom row from left) SSE, E.ON and ScottishPower

Winter heating underpayment brings summer pain

One reader’s monthly direct debit charge has been increased by 62 per cent

Almost 15,000 people died last winter through living in cold homes that they couldn’t afford to heat

Social tenants locked into energy tariff for 40 years

Many Londoners who live in social housing estates are not allowed to switch because their landlord has ‘locked’ them in to buying from one supplier

Will your credit card rewards be scrapped following new EU rules on charges?

Providers are unhappy with new EU rules - but ultimately it is customers who will have to foot the bill
There remain more than a million unclaimed Premium Bond prizes worth collectively around £48m

Have you won £1m in the May Premium Bonds draw?

More than £60m was paid out to more than 2 million prizewinners this month

The 0 per cent introductory deals that credit cards offer are one of the most odious tricks

Beware credit card firms’ odious tricks

Why can’t we just have open and honest charges, without all the cross-subsiding?

The pound’s recent strength against the euro could be hit by economic uncertainty under a new government

How planning can make your travel cash go further

With the pound at a high against the euro, it pays to buy now before uncertainty post-election

Put the phone down on the coldcallers who see pension liberation as an opportunity to liberate your pension from you

Pension freedoms: How to deal with cold calls from scammers

Sean O'Grady offers advice on keeping your money safe
Switching to a better bank account is much easier than it used to be

More people are switching current accounts – but what do the figures mean?

Experts disagree about the 7% increase over the past year

The chance of getting what appears to be free money can be hugely attractive, especially to first-time buyers who can be fooled into thinking it’s extra cash to buy the essential new items they need for their dream home.

Beware the boom in cashback mortgage deals

Too many mortgages are being sold with misleading gimmicks

The firm’s revenues slumped by a third to £217 million in a disastrous 2014

Wonga results could get even worse this year, chief admits

The firm’s revenues slumped by a third to £217 million in 2014

The cost of a buildings policy has dropped by 10.1 per cent over the year, with the cost of a contents policy falling by 8.2 per cent

Simon Read: Mild winter cuts the cost of home insurance

The average quote for a buildings and contents policy has fallen by 3.6 per cent

Don't count your retirement money yet: employers will stop receiving a pension rebate next year and their staff may lose out

Defined-benefit pension schemes: Rebate change in 2016 may leave you out of pocket

Employees in defined-benefit schemes are held up as the lucky ones, but the state pension scheme will be overhauled in April 2016
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Guru Careers: Software Developer / C# Developer

    £40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

    Neil Pavier: Management Accountant

    £45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...

    Sheridan Maine: Commercial Accountant

    £45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...

    Laura Norton: Project Accountant

    £50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...

    Day In a Page

    Abuse - and the hell that came afterwards

    Abuse - and the hell that follows

    James Rhodes on the extraordinary legal battle to publish his memoir
    Why we need a 'tranquility map' of England, according to campaigners

    It's oh so quiet!

    The case for a 'tranquility map' of England
    'Timeless fashion': It may be a paradox, but the industry loves it

    'Timeless fashion'

    It may be a paradox, but the industry loves it
    If the West needs a bridge to the 'moderates' inside Isis, maybe we could have done with Osama bin Laden staying alive after all

    Could have done with Osama bin Laden staying alive?

    Robert Fisk on the Fountainheads of World Evil in 2011 - and 2015
    New exhibition celebrates the evolution of swimwear

    Evolution of swimwear

    From bathing dresses in the twenties to modern bikinis
    Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

    Sun, sex and an anthropological study

    One academic’s summer of hell in Magaluf
    From Shakespeare to Rising Damp... to Vicious

    Frances de la Tour's 50-year triumph

    'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
    'That Whitsun, I was late getting away...'

    Ian McMillan on the Whitsun Weddings

    This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
    Kathryn Williams explores the works and influences of Sylvia Plath in a new light

    Songs from the bell jar

    Kathryn Williams explores the works and influences of Sylvia Plath
    How one man's day in high heels showed him that Cannes must change its 'no flats' policy

    One man's day in high heels

    ...showed him that Cannes must change its 'flats' policy
    Is a quiet crusade to reform executive pay bearing fruit?

    Is a quiet crusade to reform executive pay bearing fruit?

    Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
    The King David Hotel gives precious work to Palestinians - unless peace talks are on

    King David Hotel: Palestinians not included

    The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
    More people moving from Australia to New Zealand than in the other direction for first time in 24 years

    End of the Aussie brain drain

    More people moving from Australia to New Zealand than in the other direction for first time in 24 years
    Meditation is touted as a cure for mental instability but can it actually be bad for you?

    Can meditation be bad for you?

    Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
    Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

    Australia's first-ever Eurovision entrant

    Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine