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Graduates entering the workforce have been urged to begin topping up their pension pot, as retirement poverty worries continue to loom large.
Nearly 90 per cent of recent university graduates believe pension planning is important, but pressing financial matters have shifted their focus away from saving for retirement, according to research from insurance provider Standard Life.
Short term needs taking priority
Less than one in five view saving for retirement as a top concern upon starting their careers, with 40 per cent opting to prioritise boost their general savings instead of auto enrolment contributions.
The government’s recent push to encourage more people to actively contribute to the stock market has also pushed 35 per cent of grads to inject their pay into investing.
The soaring cost of living also found 35 per cent of young grads concentrating on affording day to day living expenses, including rent and travel, with over 50 per cent of the younger generation currently renting or living with loved ones.
Despite the struggles of getting on the housing ladder, nearly a third opted to save towards a home instead, over pension contributions.
While focusing on buying a property can be viewed as a risky move due to current state of the market, the younger generation view property as a key part of retirement planning, believing both property and pension money is crucial for their financial future.
Dean Butler, managing director for retail direct at Standard Life said, “Graduates have a lot to juggle as they take their first steps into working life, from rent and bills to saving for a home.”
“Therefore, while most recent university leavers are conscious of the importance of pension planning, it’s understandable that other financial concerns take priority.”
Early contributions over a takeaway
Despite many young people viewing retirement as a long way off, worries over retirement poverty continue to plague UK workers, with women, low earners and the self employed most at risk.
Many industry figures have raised concerns over both near retirees and young people in the future not having enough to fund a comfortable retirement, with the government now reviving the Pensions Commission in attempts to end the problem.
However, those who choose to save a bit more into their pension upon beginning their career could find themselves in a better financial position in the future than those who focus solely on balancing short term monetary needs.
According to Standard Life analysis, someone who begins working on a salary of £25,000 per year, and pays the minimum monthly auto-enrolment, could have a retirement fund of £210,000 by the age of 68, in line with inflation.
However, if contributions were increased by just 1 per cent, a saver could make a “notable difference”, accumulating £236,000 by the age of 68, a £26,000 increase of what the standard contribution could achieve.
Butler said, “For those able to do so, sacrificing a round of drinks, a gym class or a takeaway each month and putting those savings into a pension can make a notable difference over time.”
“Topping up pension contributions from the start of a career could be hugely valuable, as your pension will benefit from tax relief, and from the power of long term-investment growth.”