The late starters

By HELEN LOVELESS, MAIL ON SUNDAY ENTERPRISE EDITOR
Updated:

 

YOUNG people face widespread poverty in retirement because they are failing to invest in pensions, a new report has warned.

Figures published by the Government reveal the number of younger people in pension schemes has fallen, with fewer than half of those aged under 30 currently saving into a pension.

This compares to 62% of those born in the Fifties and 73% of people born in the Sixties who started a pension before the age of 30.

The drop in the number of younger people investing in pensions has been blamed on a number of factors, not least the 'retreat' of employers from contributing to decent occupational schemes. This is supported by figures showing that when employers don't contribute to work-based schemes, only 13% of employees save.

Yet when bosses make a contribution of more than 5%, a healthy 69% of staff join a pension scheme.

Younger people are also facing more pressure on their finances as a result of high property prices, increased student debt and low wages, say the Trades Union Congress (TUC), which carried out the report.

It also believes the pension scandals and mis-selling have made many people suspicious of pension companies and put them off saving, with many not realising the extent of financial problems they are storing up by failing to save for retirement.

Brendan Barber, general secretary of the TUC, said: 'Young people have started a slow pensions timebomb. Unless they take out pensions a generation faces poverty in old age. We used to think that slowly but surely we were all getting more prosperous. That's not likely to be true in retirement unless these trends change.'

In fact, as people live longer they will need to start saving earlier, and putting by more each year, in order to retire at a reasonable age with an adequate pension, the TUC has warned.

Someone starting a pension at the age of 20, paying in £100 a month, will receive a pension of around £142 a week if they retire at the age of 65, estimates show. However, if they don't start a pension until the age of 35, the weekly pension they can expect falls to just £71, not including the state pension.

The TUC has called on the Government to change the pensions law, to compel employers to make decent contributions to occupational schemes, in order to boost the number of young people making provision.

'All the evidence shows that employees understand occupational schemes and will join a work based pension scheme, where they find making their own arrangements expensive and confusing,' he added.

The TUC is holding a Pay Up For Pensions March and Rally on Saturday 19 June. It will begin from Temple Tube, Embankment, London.

www.tuc.org.uk/pensionsrally

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