A study by Scottish Widows has revealed that 70% of people aged 22-29 surveyed were not saving enough for their retirement and could be facing substantial shortfalls (1).
The survey group of 5,300 people aged 22 to 29 years old typically expect to need an income of around £23,000 p.a. for a comfortable retirement. Despite this the amount being saved for retirement would result in an actual annual income of £15,200 (2).
To achieve this desired income young savers would need to put away 12% of their income, including any employer contributions. A third of those surveyed are struggling to achieve saving targets due to rising rents, student loan repayments and substantial credit card bills (1).
Scottish Widows are suggesting that to fully engage young savers with the importance of retirement savings digital communications are required. The report said
“To do this the industry must make significant investment in digital innovation – we need to reflect the way young people engage and do it quickly or we risk turning off a whole generation to long-term savings.” (3)
Catherine Stewart from Scottish Widows, said: “While retirement may feel like a long time away for those in their 20s, it’s really important they start to think about it as soon as possible. Using the right platforms, technology and content to engage young people in formats they appreciate is a critical first step. If we don’t get this right then it is far more difficult for them to reach their desired savings levels in their 30s and 40s.” (3)
A Department for Work and Pensions (DWP) spokesman took a more positive view: “Young people have competing demands when it comes to saving their money, but the truth is they are embracing pension saving. Almost seven in 10 eligible 22 to 29-year-olds working in the private sector are now enrolled in a workplace pension.” (1)
Auto enrolment has certainly got huge numbers of new savers enrolled in pensions; however with life expectancy and time spent in retirement now substantially increased, ongoing effective communications on the need to increase contributions are required.
The value of pensions and the income they produce can fall as well as rise. You may get back less than you invested.
The Financial Conduct Authority does not regulate on Auto Enrolment.