Generation Y expect £100,000 pension but over half haven’t started saving

Generation Y expect £100,000 pension but over half haven’t started saving

Generation Y expect £100,000 pension but over half haven’t started saving

New research* from workplace pensions provider NOW: Pensions reveals that Generation Y think they’ll have around £95,000 in their pension pot when they retire with men expecting £111,000 and women expecting £82,000. This comes despite over half (58%) admitting that they haven’t started saving yet.

Of those surveyed, 65% of 18-25 year olds say they aren’t saving into a workplace pension with 53% of 26-35 year olds stating that they are yet to begin saving.

When presented with information about how much would potentially come out of their pay packet each month, only a third (31%) say they could afford to save while 44% say they can’t afford the contribution now but believe they will be able to in future.

The average salary young people say they would need to earn in order to be able to afford to make a pension contribution is £26,836.

Of those that are saving, the average amount being set aside each month is £22. If contributions continued at this level, this would deliver a pension pot of £18,000 over 30 years of saving and £56,500 over 40 years of saving assuming 5% per year investment growth.

To achieve a pension pot of around £100,000, savers would need to set aside approximately £120 each month if they saved over 30 years and £70 if they saved over 40 years.

If used to buy an annuity at retirement, a £100,000 pension pot would buy a fixed income of between £5,000 and £6,000 a year.

Morten Nilsson, CEO of NOW: Pensions said: “Auto enrolment will go a long way to getting young people into the savings habit but the sooner they start saving and the more they set aside each month, the easier it will be.

“While a £100,000 pension pot seems like a healthy amount, men aged 25 today are likely to live until they are 88 and women are likely to live until they are 91** which means that this pot has to fund around two decades of retirement.”

Categories: News, UK Pensions