This comes despite the fact this would require a savings pot of nearly £1.9million, a sum significantly greater than the pension lifetime allowance.
Research from Aegon shows that to achieve a pension pot that would fund a yearly income of £64,000, a person aged 20, aiming to retire at age 68, would need to save £500 a month, assuming a 5% return on their investments. However, with 16 to 24 year olds hoping to retire at 63, they would have to put away even more, saving £800 a month. In reality, three fifths (59%) of this age group don’t contribute any money to their pension pot at all.
However, as people get older their retirement income ambitions do tail off, with the income people hope for dropping through each age group. The ambitions of those aged 25 to 34 fall to £45,000, and those closest to retirement age 55 to 64 hope to have an annual income of £30,000, more than half that of 16 to 24 year olds.
Aegon’s research also reveals that, despite hoping for the highest retirement income of any age group, those aged 16 to 24 are the least engaged with their pension savings. Seven in 10 (70%) have never done anything to review or affect plans for retirement while over half (54%) don’t know whether they are eligible to be enrolled into a company pension, a vital starting point for those looking to grow their pension pot from a young age.
Despite these unrealistic expectations, and lack of engagement, the UK’s younger generation are aware they may have to work longer. Two-fifths (38%) of 16 to 24 year olds are prepared to continue working in the event they have failed to save enough by the time they reach their target retirement age, whilst three in 10 would expect their employer to create a role that would help them work on a part time basis.
David Beattie, Managing Director, Aegon UK Direct said:
“The findings don’t paint a pretty picture for the UK’s younger savers. Unrealistic expectations both in retirement income and early retirement age mean that this age bracket are set to fall well short of the retirement income they want. However, we must remember that younger people have different financial priorities, such as saving for a deposit on a house or paying off student debt, and this can mean putting money aside for a pension doesn’t top the list. What this age group has on their side is time, but it is important this doesn’t lead to complacency. The earlier people start saving, the more their money is likely to do for them in return.
“We want people to start engaging with their pension from a younger age so they will be able to have the retirement they want. We as an industry, have a key role to play, in collaboration with the Government, to help young people, especially those taking their first steps in their careers, see retirement saving as a positive and not just money that gets taken from their pay each month.”
