August 2007

Burying heads in the sand

Dear Editor,

For those in their 20s and 30s today, there is reason to be concerned over what will happen in retirement. The key concern is that this generation is not worried enough.

According to recent research, 76% of 22 to 34 year olds would like to retire by the age of 60 and 59% expect that they will have enough income to live out retirement comfortably. But only 43% have actually looked into saving or investment for retirement.

It is not that this age group is under any illusion that the state will look after them; 65% believe that it is up to them to provide for themselves in retirement, and only 21% expect the State pension will be sufficient to live on when retired. The trouble is in turning understanding into action.

Working in the industry, we are all too aware of the benefits of starting a pension sooner rather than later. A basic rate tax payer saving £78 a month (grossed up to £100 a month) from the age of 22 can expect to have a retirement fund of £145,675 by the time they reach 60. In contrast, a person waiting until they are 42 to start saving at the same level might only have a fund worth £36,046 at age 60 (assuming annual growth of 7% and annual management charge of 1.5%). Yet 26% of 22-34 year-olds think that it is too early for them to start saving for their retirement.

The notion of retiring early, in comfortable wealth and having time and money to spend on luxuries can only become a reality if people plan ahead. Ignoring pensions will not make the issue go away. Sadly, it seems that this generation of optimists is shrouded with an ostrich effect, and need to be encouraged to lift their heads out of the sand before it is too late. Let us hope they heed the warning.

Nick Bladen is head of pensions marketing at Skandia

Letters can be sent to The Editor, Retirement Planner, Incisive Media

Investment Division, 1st floor, 2 Stephen Street, London W1T 1EA or by email to helen.morrissey@incisivemedia.com.

Nick Bladen
Head of Pensions Marketing
Skandia