With saving for a house deposit, paying sky-high rent and navigating rising levels of inflation, saving for retirement may not be particularly high up on many under-40s’ agendas.
It’s also hard for many to know what the state pension – the weekly payment given to those aged 66 and over – will look like in several decades’ time.
But despite this, young people are constantly reminded of the importance of saving for a private pension from as early in their working lives as possible.
The i Paper spoke to several under-40s across the UK to find out how they are approaching retirement planning.
Cheryl Crossley, who works in PR, says she is sensible with money, but demands on her cash now means saving extra into her pension seems unrealistic at the moment.
Cheryl, 35, lives with her husband in Leeds and is expecting a baby, so says this will add to the “demands” on her financially.
She does not know how much is in her workplace pension at the moment, nor what she is forecast to have in retirement, and although she has never opted out of paying into one, she has never saved more than the minimum – which is 5 per cent of your salary.
“The savings we are putting aside are more for a house move, or for general ‘rainy day’ stuff. We’re sensible with money, but putting extra aside for a pension now just seems so unrealistic,” she says.
She adds: “At the moment, it seems unlikely there will even be a state pension by the time we want to retire, or you’ll have to be about 90 years old to get it and it’ll be heavily taxed.
“It’s a depressing thought, and it seems entirely outside of our control so I try not to stress about it. Of course we want to retire at a reasonable age like our parents have, but I feel fairly powerless to influence that without massively changing all aspects of our lives.”
She says she would rather go on the occasional holiday now and enjoy her life rather than have a sort of “half-life” where she is being extremely frugal in order to retire earlier.
“You hear stories of people working themselves so hard, being frugal and then getting a diagnosis that means they can’t travel when they retire, or only last a year or two. To some extent I think you can only really have one eye on the very long-term future, and instead it’s better to focus more on the next five to 10 years.”
Twenty-two-year-old Toby Welton, who works as a think-tank researcher, says he has struggled to contribute to a pension so far.
He is self-employed, so any cash he does save goes into a self-invested personal pension (SIPP) but he says at the moment, there is only a few hundred pounds in there.
“Saving into a pension lingers in the back of my mind but the truth is it is very hard when you have to pay rent,” he says.
He has taken on extra tutoring work to save extra money into his pension and also has some money in a pot from when he worked for an agency as a teaching assistant.
“I’m banking on earning more in a few years time which is how I justfy not saving much now, but there are also other things think about like saving for a property deposit,” he adds.
In terms of his expectations for the state pension when he retires, Toby says he expects it will be there in some form, but that the triple lock – the mechanism which governs that payments increase by the highest of inflation, average earnings growth or 2.5 per cent each year – will “definitely” not exist.
“I’m sure there will be some form of pension, but I wouldn’t account or plan for how generous it will be,” he says.
Qin Xie works as a freelance travel writer and runs a personal finance newsletter called Money Talk, which she describes as her “side-hustle”.
She says she could afford to put more into her personal pension, but instead puts a minimal amount in.
Qin, 38, says that as she is self-employed with irregular income, her primary concern is paying her mortgage on the flat she owns off early.
“Basically, I see my pension as just part of my retirement plan and not all of it – I’m saving for retirement in other ways too,” she says.
She has a Lifetime ISA, a product designed to help people save for retirement, which offers a Government bonus on money saved, and says she expects the value of her house will increase.
“I will most likely move out of London on retirement and either rent or sell up depending on what works best at the time,” she says.
Qin says the state pension doesn’t “factor in” to her retirement planning at all.
“It feels like a constantly moving goal post and it would be a struggle to live off the tiny amount of money that you actually get in London,” she adds.
She thinks she will possibly increase her pension saving after she hits 40.
“I think even if I started saving properly for a pension at 40, I’ll have built up a substantial pot by 60 so I’m not overly concerned,” she adds.
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