Graduates risk halving their income in retirement if they delay saving in a pension until they are 30.
Research carried out by NOP on behalf of HSBC Bank reveals half of 16-24 year olds believe they are too young to be thinking about pensions, however the bank warns this could lead to them losing out in retirement.
The survey of 865 adults also shows 90% of 16-24 year olds and 44% of 25-34 year olds are not making any contributions to a pension, with the trend being for people to wait until their mid-30s before they start taking a pension seriously.
As the results reveal, the number of 35-44 year olds who are making some kind of pension contributions have risen from 55% of those questioned in 2005 to 69%, while the number of 45-64 year olds who say they are saving for retirement has also increased by 17% from last year to 66%.
But HSBC warns delaying saving until the mid-30s can be expensive for graduates, as a 21-year-old saving £75 a month in a stakeholder pension, with 4% annual increase in contributions up until the age of 65, would leave the member with a fund of around £337,000, equal to around £12,700 income each year.
However if a graduate delayed saving until they were 30 and still contributed £75 a month, HSBC calculates they would receive a fund worth just £171,000, or £6,470 income a year, which is 49% lower than if they had started saving nine years earlier straight after graduation.
Ian Martin, head of pensions and retirement income at HSBC, says there has been a great deal of talk about pensions and it seems older workers are starting to hear the messages about saving for the future.
But he warns for graduates who are just starting work for the first time, retirement seems a long way off and their pension does not seem to count as a priority when thinking about the future.
In addition, although not all companies offer pension schemes, Martin says graduates should not be put off from setting up their own pension, as he points out the A-Day changes now offer greater flexibility for people paying into a personal pension.
And he points out by increasing contributions in line with salary increases year-on-year, graduates “could retire with a pension fund of £337,000, twice what they would have if they started making contributions at age 30”.
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Nyree Stewart on 020 7968 4558 or email [email protected]IFAonline
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