Young people must have simpler and more flexible options to save made clear to them, says Fair Investment.
George Ladds, head of investment and pension research, says the UK's youth are "bewildered" by pensions and do not make retirement saving a priority, even though the basic state pension is only £5,000 per year.
He adds whilst young people may not understand or like pensions, they may find ISAs more accessible, and this option needs to be explained to them.
"Saving just £50 a month at a young age can make a big difference," Ladds says.
"All the investments are invested in a fund that has the same tax benefits as a pension fund, so they grow in a similar way.The big difference is in the flexibility.
"With an ISA, money can be taken out at any time and an income can be taken tax free whereas with a pension, benefits cannot be taken until you are 55 and only 25% can be taken as cash.
"Of course there are arguments that pension contributions offer tax relief but I would argue a tax-free income in retirement is highly attractive."
Ladds urges the Government to do more to support and promote flexible savings options.
"At the moment your employer cannot pay into an ISA but that might change," he says.
"I would like to see ISAs blended with pensions and state pensions; this could make for an attractive proposition to encourage young people to save.
"To make this work, the Government needs to stop burying its head in the sand and wasting money on hair brain schemes like Group Stakeholder Schemes or NEST and come out with a sensible flexible way for people to understand the importance of saving for their future.
"If they don't they are just storing up a retirement time bomb where no-one can afford to retire, and those that do turn to the State for more money."
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