Are you a part of the pension ticking time bomb?
If you are a regular visitor to this blog you will know that I am an extremely late retirement saver and only very recently started taking care of my pension.
I was warned at 28 that I was already too late by a financial advisor, I chose to act at 34 – idiot!
I know I’m not alone though, many of my friends have nothing in place and have not given it the slightest bit of thought.
Who can blame us when nobody educated us about this? Unfortunately in the UK, unless your parents are financially savvy and pass on their knowledge to you, you are pretty much left to discover the world of finance yourself.
Is it any wonder that we are now facing a pension time bomb just waiting to blow up in our faces?
We are not saving enough
Former pensions minister Steve Webb has warned that people who have workplace pensions and only pay in the minimum contribution are sitting on a ticking time bomb, and he is correct.
There is a real danger that people may believe that making the minimum contribution to their pension pots will end up with a decent pension to live off in their twilight years.
In reality many will need to significantly up their payments in order to achieve the retirement they want.
Automatic enrollment has been a good thing since it’s launch in 2012 with around 6 million workers already signed up.
As the scheme is rolled out further around 10 million people are expected to be newly saving, or saving more which is fantastic.
Currently 9 out of 10 people have stayed in their work pension after auto enrollment – again, brilliant!
Now for the bad news
Too many people are not saving enough and are going to find themselves coming way short of a pension you can live comfortably off.
I am in this group, I am now saving significant sums to catch up. In fact, i am pushing myself to extreme levels because I’d like to bring my retirement forward to 50 years of age – each to their own.
Currently workers need to contribute just 1% of their earnings as a minimum and it is simply not enough. By April 2019, the total minimum contribution will be 8%, 5% staff contribution and a further 3% by your employer.
We’re leaving it too late
The problem we have is we’re not starting early enough, if i knew then what I know now I would have started the minute I got my first job. It seems attitudes towards saving are not changing radically enough too.
In a recent survey of one thousand 18-24 year olds conducted by icount Money, only 48% of those surveyed thought you should start saving for retirement between the ages of 20-29 years old, another 24% said they thought you should start between the ages of 30-39.
I was truly shocked at those results but nothing could have prepared me for the next stat – 13% of those surveyed thought you should start saving for their retirement between the ages of 40-49, 3% between the ages of 50-59 and 3% didn’t have a clue – scary statistics!
It’s not their fault, nobody is advising them when to start. I am about to up my personal contribution to 10%, I have to if I want to realise the dream of having an early and comfortable retirement.
It’s about time we started educating our young on retirement and saving into their pension pot before it all blows up in our faces. The reality is, if you’ve got to 22 you’re already playing catch up!
When did you start saving for retirement? What do you think is a sensible contribution?
He is also a contributor to Clear Debt, ICOUNT Money and M1 Debt Advice blogs discussing all things personal finance.