Young people face working till they’re 77
THE younger generation is struggling to save enough money to fund a comfortable old age and faces working until their late seventies, research claims.
A typical Millennial is able to save just £103 a month – £1,236 a year – which means a retirement age of 77 before they have a pension pot big enough for the standard two thirds of salary. And 49 per cent of those born between 1979 and 1995 cannot afford to pay into a pension. The findings follow this week’s projections by the Government Actuary’s Department that forecast under-30s working until 70 to qualify for a state pension.
Only 31 per cent of younger workers have a workplace pension and are able to pay in the minimum contribution; of those who cannot afford a pension, an average of £40 a month was all they could save.
Richard Apletree, managing director at the financial advice website giffgaff money, which commissioned the survey, said: “It’s a shame to see the financial difficulties of younger workers not only affecting their ability to save for the near future but also forcing them to work long into their retirement years.
“While some younger people are able to make the minimum contributions to their workplace pension greater investments often reap generous benefits.”
A separate review published this week by John Cridland, former director-general of the Confederation of British Industry, proposed that the state pension age should rise from 67 to 68 between 2037 and 2039.
This change would be seven years earlier than planned and will hit those currently aged 45 and under.
The Government is under pressure to address the spiralling cost of the £100billion a year state pension.
The cost is expected to increase further because of rising life expectancy and the effect on the ratio of pensioners to workers.
Vince Smith-Hughes, retirement expert at Prudential, warned that because of the proposed changes, younger people will need to plan ahead.
He said: “They are likely to find their state pension age is significantly higher than they currently assume.”
A recent report from think-tank the Resolution Foundation found a 10 per cent pay gap between young people’s earnings today and 2009.
It found those aged 65 to 74 holding more wealth than the entire under-45 population.
Tom McPhail, head of retirement policy at financial advisers Hargreaves Lansdown, said: “Younger workers won’t get a state pension until around 70 and we know many are struggling to make savings out of their income, so it’s vital they make the most of any employer contributions into their workplace pension.”