Earning? Time to start saving ...
Young people must look to their pensions, says Peter Clifton
Wednesday 18 December 1996
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
23 January 2015 08:00 PM
I had dinner with the pensions minister Steve Webb this week. There was a wide-ranging discussion about the new pensions freedoms starting in April, and changes to the state pension. Crucially, I also got to ask Mr Webb whether he had any plans to have another look at the injustice that is frozen pensions.
23 January 2015 08:00 PM
While the health of the economy is not insignificant, Mark Dampier finds it incredibly unpredictable in terms of its impact on the stock market
21 January 2015 12:32 PM
A new free app is aimed at the three-fifths of Brits who have never switched supplier
20 January 2015 09:34 AM
Regulator’s investigation into the market found that around £160bn was held in easy access savings accounts that pay interest lower or equal to BoE base rate
17 January 2015 12:00 AM
Simon Read: Information is power. And it's in the wrong hands when people are cold-called by companies that know they're in debt
17 January 2015 12:00 AM
In debt? You're likely to be targeted by unscrupulous companies that hope to profit from your misfortune. They may try to pretend to be your friend by offering what they call "help" – but almost certainly that help will come with a cost and leave you worse off than you were before they got in touch.
17 January 2015 12:00 AM
In less than three months' time radical changes to pensions will take effect, providing investors with more freedom. Yet for those who prefer to make their own investment decisions, the choice of funds available is overwhelming. And an income drawdown account is also not particularly easy to manage.
15 January 2015 12:23 PM
The minimum amount for which you can be forced into bankruptcy is being raised from £750 to £5,000
14 January 2015 08:55 AM
A shock report reveals that fuel poverty is affecting desperate families – and their children
14 January 2015 08:59 AM
Most people are too confused to know how to use their pensions for a secure income
10 January 2015 12:00 AM
Simon Read: Inflation is riding the slow train. So why have we been given a one-way ticket to travel on the fares express?
10 January 2015 12:00 AM
I struck a chord with many of you when I wrote a piece earlier this week about rising train fares. It seems there is an army of travellers who feel they've been ripped off by increased transport costs.
26 December 2014 02:31 PM
Poor service from banks and energy companies has sadly been a theme this year
Buyers beware of new-build home headaches
Are you ready for pensions reforms?
Dirty tricks in a divorce can cause some nasty surprises
Simon Read: Frozen in time - the expat British pensioners who deserve a better deal
Number of serially under-performing investment funds has increased by a fifth, survey reveals
- 2 Man who held up 'hire me' sign at Waterloo station returns a year later with 'I'm hiring' sign
Nigel Farage: NHS might have to be replaced by private health insurance
'We would evict Queen from Buckingham Palace and allocate her council house,' say Greens
French court convicts three over homophobic tweets, in case hailed as a 'significant victory' by LGBT rights campaigners
British Muslim school children suffering a backlash of abuse following Paris attacks
George Galloway condemns 'racist, Islamophobic, hypocritical rag' Charlie Hebdo at freedom of speech rally
Islamic history is full of free thinkers - but recent attempts to suppress critical thought are verging on the absurd
iJobs Money & Business
£18000 - £20000 per annum: Recruitment Genius: This rapidly expanding business...
Negotiable: Recruitment Genius: A Tax Assistant is required to join a leading ...
£16000 - £25000 per annum: Recruitment Genius: This is an exciting opportunity...
£45000 - £47000 per annum + bonus + benefits: Ashdown Group: Java Developer / ...
Day In a Page
Hibernate during winter and make your living during the summer at this busy guesthouse with panoramic sea views, in the village of Lynton
A four-bedroom penthouse next to the Tate with direct views of St Paul's from two floors of luxurious living space
A four-bedroom detached home surrounded by spacious gardens and woodland, close to New Pudsey
An 18th-century, three-bedroom home near Langstone Harbour built from ships beams with vaulted ceilings and wood burning stoves
A five-bedroom semi-detached home with a mix of period and modern features in a popular and convenient location
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village