A leading pension expert has warned that workers today need to put saving for their retirement at the forefront of their agenda or face an uncertain future.
Stuart Price, Partner and Actuary at Quantum Advisory, said:
“Many people born before 1960 would likely have been a member of an employer’s defined benefit (DB) pension scheme and can look forward to a relatively comfortable retirement. However, this comes at the expense of the younger generation.
“While DB schemes were once the norm, they are now scarce due to the spiraling costs to employers and have been replaced by far less generous defined contribution (DC) arrangements.
“Auto-enrolment has gone a long way to ensuring that the majority of workers are now saving into a private pension, albeit a DC arrangement, however, the current minimum contributions are sadly still not enough for people to build up the pensions pot they need.
“A recent survey by Prudential reassuringly found that more than half of millennials want to be educated about how to best save for their retirement. This is great news that youngsters are taking in an interest in their long-term financial wellbeing.
“The planned introduction of the Pensions Dashboard aims to provide a simplified way for individuals to see all their pension savings in one place, give them an idea of their likely income when they retire and should go a long way to addressing much of the perplexity.
“Education is key, and I think people today are more clued up about their pension and understand that they cannot enjoy a comfortable retirement on the State Pension alone – that’s if there even is a State Pension when they come to retire.
“I firmly believe that explaining about pensions should be taught in school – from secondary through to college and university. Employers should also take responsibility and teach their staff about the pension options available to them, and how much they should be saving.
“My rule of thumb to give people the best chance of a decent income in retirement, is to half your age and pay in that percentage of your salary into a DC arrangement. So, for a 40 year old, the total contribution from the worker and employer should total 20%. I appreciate this is easier said than done, particularly with other priorities for income such as a mortgage, rent, student loans and bills, but the earlier you start saving the right amount, the better your future will be.
“There are options available to get the most out of your savings, such as flexible benefits packages that can be tailored to individual employee circumstances. Personalised solutions like these provide a range of traditional and innovative employee benefits aimed to engage more workers and allow everyone to have more control over the components that apply to them.
“There really should be no excuse for millennials in employment not being aware of their responsibility to pay into a pension scheme. If they don’t then as a nation in the next 30 to 40 years we are going to have a huge welfare problem on our hands.”
For more information visit www.quantumadvisory.co.uk.
Stuart Price is a Partner and Actuary at Quantum Advisory, which has offices in London, Amersham, Bristol, Cardiff and Birmingham.
Established in 2000, Quantum Advisory provides pension and employee benefits services to employers, scheme trustees and members.