Young workers heading into a pension shortfall by not saving enough
SEVEN in 10 younger workers are heading towards a £9,000 cash shortfall in their pension because they are not saving enough, experts have warned.
Those aged under 30 typically expect an annual income of just over £23,000 for a comfortable retirement a survey of 5,300 people found.
But based on the amounts people in this age group said they were saving, the insurer calculated they could face an average shortfall of around £8,000 per year, as they could typically expect to end up with a yearly income of £15,200.
A 30-year-old contributing the current minimum of one per cent to their workplace pension which is matched by their employer will achieve an income in retirement of £9,734.
Even when the minimum contributions rise to eight per cent combined in 2019, they will only achieve an annual retirement income of £14,047.
This is a shortfall of almost £9,000 on expectations.
If someone starts saving into a pension at 25 years of age, they would need to put aside £293 each month to reach a £23,000 annual income.
Not starting to save until 35, monthly savings would need to jump to £443 and at 45 this would be £724.
For someone who left retirement saving to their 50s, they would need to put away £1,445 a month to enjoy a £23,000 annual pension.
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.
If you have any questions or would like further help in connection with your pensions/retirement planning including the new pension freedoms please contact.
Debbie Day. M: 07704311021. www.debbiedayifa.co.uk