If young people want to enjoy the same standard of retirement as baby boomers then they are going to think long and hard about their pension contributions now. A recent international study has revealed they they should be saving 20% of their lifetime salary to secure an income that would match this in their old age.
In this article about future pension problems for young people we shall examine:
- The findings of a recent survey
- The amount of young people who manage to save
- The recent auto-enrolment pension schemes
- The millennial generation are being accused of being reckless
- Do they deserve these accusations?
- The increasing house to wage gap
- The cashfloat direct lender are designed especially for the need of short term financial crisis and unprepared needs, this emergency fast cash loan will ready to help you and make to come out from the financial crunch.
What has latest research about pension problems for the millennial generation revealed?
The latest research was conducted the International Longevity Centre – UK (ILC – UK) in 30 advanced economies and found some worrying statistics. The study revealed that if young people wish to enjoy the kind of retirement that the baby boom generation currently enjoy, they will need to start saving 20% of their income over the course of their working lives and 18% to secure an adequate income. If they fail to do this then they could be looking at poverty filled retirement years.
If young people wish to enjoy the kind of retirement that the baby boom generation currently enjoy, they will need to start saving 20% of their income over the course of their working lives.
The current workplace was described as “a hostile economic environment” for young people today. The study looked at affordability, adequacy and inter generational fairness of pensions and found that many factors had contributed to the current pension attitude. The slow growth of the economy, low interest rates, low investment returns, slow wage growth and the collapse of defined benefit pensions are some of the reasons that our young people today are in this present situation.
How much are youngsters managing to save for their pensions?
The research also revealed that a shocking number of young people do not save any money for their retirement years. Only 12.5 % of employees save anything over 15% of their salaries and 30% make no savings at all. This group of people, that are not making any retirement plans by not saving any money at all, are in danger of reaching the age of retirement with no money to show for a lifetime of working, warns the think tank.
Auto-enrolment has been in place since 2012
The introduction of auto-enrolment since October 2012 has seen almost six million workers join up. The scheme encourages workers to start saving for retirement by saving a small percentage of their salaries. These workplace pension schemes automatically take the small amount of 0.8% of a worker’s earnings. By April 2019 the figure will rise to 4% with an added 3% from their companies and an extra percentage added by the government. Although these schemes are better than not saving at all, as the research indicates it is not an adequate amount to hope for a comfortable retirement.
There are calls for auto-enrolment for the self employed
The assistant economist for ILC – UK, David Hochlaf, spoke about the report’s revelations and called for the government to do more to help vulnerable groups such as the self employed and people on benefits. There have been no schemes for people in these two groups to help them save for their retirement. He stressed the need by the government to encourage people to save more money by extending pension coverage and supporting them in this endeavour. The report highlights the need for people to save privately and not just rely on the state pension as it was recently announced that the later retirement age for those born between 1970 – 1978 was to be brought forward.
So what have we learned so far?
- Young workers need to think about their retirement and save more
- They would need to save 20% of their earnings to have the same pension as a baby boomer
- For an adequate retirement they would need to save 18% of their salaries
- Only 12.5% of workers save over 15% of their salaries
- The amount of people who save nothing for their retirement is 30%
- Auto-enrolment has started people saving at a slow rate that rises as the years go on
- More government initiatives are needed to help vulnerable groups to save money
The millennial generation have been accused of not knowing how to manage money
Numerous studies have all revealed the same worrying results when focused on the millennial generation. They reveal that this generation of young people are not interested in saving, have no idea of how much money they should be saving for a comfortable retirement and are not planning for their futures. The youngsters between the ages of 18 – 34 have been labelled “clueless” about their financial situations.