Britain's baby boomer generation say their biggest financial regret was not
starting saving for retirement earlier, according to a new study.
Nearly one in seven (15pc) of adults admitted wishing they had started a
pension sooner, with the figure rising to one in five for those approaching
retirement, research by Standard Life showed.
Regrets about pension saving narrowly beat remorse about running up credit
card debts (see the top five below).
Independent financial advisers have long warned about the adverse affect of
starting a pension later.
Those who start saving £100 a month at age 25 could receive an income of
£3,570 a year by the time they are 65, according to Standard Life. Using the
same assumptions – investment growth of 5pc and increasing saving each year by
3pc – someone saving the same amount from age 40 would have a pension income of
only £2,000 a year by the same age.
"If 20pc of baby boomers who are retiring or are already retired say they
wish they’d started saving for their retirement earlier, then we would be
foolish not to listen to their advice," said Julie Russell of Standard Life.
"The earlier we start saving, the bigger the impact on our future finances.
“For those who feel they’ve already left it too late, the important thing is
not to panic and save what they can now.
"And those who are not already saving through a workplace scheme or about to
be automatically enrolled into one should find out more about personal pensions
if they don’t want to end up with the same regret as many other personal pension
savers."
However, official figures have shown how pension membership has rapidly
declined. Less than half of all employees, 46pc, were part of a workplace
pension scheme last year, the Office for National Statistics (ONS) said last
month. That was the lowest figure since it started collecting similar data in
1997.
Only 32pc of private sector employees were saving into a workplace pension in
2012, in sharp contrast to the public sector, where more than 80pc of employees
were enrolled in a workplace pension scheme.
A study by HSBC last month
suggested Britain had the worst retirement savings deficit in its
global study of select countries. It said Britons were likely to live for 19
years but had only enough savings, on average, to cover seven years of it.
A series of pension mis-selling scandals in the Nineties eroded confidence in
pension saving and constant tinkering with the system since then has made savers
wary of schemes, critics say.
Households have also seen real incomes decline during the financial turmoil
of recent years, making it harder to prioritise pension saving.
The Government last year launched a national auto-enrolment scheme, which
will see all employees placed into a pension, but they will retain the right to
opt out. If the opt out rate is too high, the Government will consider in 2017
whether to introduce compulsory pension saving.
The top five biggest financial regrets
1. I wish I had saved for retirement earlier (15pc)
2. I wish I had avoided running up debt on credit cards or store cards (14pc)
3. I wish I had set and stuck to a budget (10pc)
4. I wish I had spent less on nights out and saved more in general (9pc)
5. I wish I had sold things I no longer needed (5pc)
Pensions offer a tax-efficient way to save because income tax is waived on
contributions that are made. Mostly this happens by paying into a pension from
work before your wages are taxed. Those paying into a pension other than through
work get a boost to their contribution to take into account the basic-rate
income tax they have paid. Higher-rate taxpayers can claim back the difference.
Advisers recommend those without a pension first consider any scheme offered
by their employer. Most companies will contribute and many will match the amount
you put in.
Outside of work schemes, stakeholder personal pensions are savings schemes
where the fees are capped and are worth considering. For those who want to take
a more active role in selecting investments, a Sipp (self-invested personal
pension) is worth considering.
Among the cheaper Sipp options to consider are those offered by Hargreaves
Lansdown, Sippdeal or Alliance Trust Savings.
The 'baby boomers' identified by Standard Life were interviewees aged over
55. The wider definition is those born during an explosion of births between
1946 and 1962, who would today be aged 51 to 67.
http://www.telegraph.co.uk/finance/personalfinance/pensions/9915075/Baby-boomers-admit-their-biggest-financial-regret.html
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