Bridging the pension gap – BLOG – Adrian Firth
May 1, 2024 11:46 amUrgency for younger generations to access improved financial education
The chasm between generations regarding retirement prospects is glaringly apparent, as 78% of
individuals believe their predecessors had more favourable pension plans or brighter retirement
futures. According to recent research, this data highlights a stark revelation that underscores the
urgency for younger generations to access improved financial education[1].
This will help address the inequitable distribution of retirement benefits across different genera-
tions, particularly considering that 38% of UK residents started contributing to their pensions when
they were at least 35 years old.
Sacrifices and aspirations
A staggering 51% of respondents indicated a willingness to forfeit significant life goals or dreams to
increase contributions towards their pension funds. Furthermore, 66% of participants expressed a
longing for travel during retirement. These findings highlight the crucial role of financial planning in
achieving these aspirations and the discrepancy between expectations and reality.
The importance of financial education
There might be nothing ‘cool’ about pensions for younger people today, but they’re an essential
financial safety net and must be part of financial education. This education can occur at home,
school or work to aid individuals in making informed decisions that will yield benefits when needed.
Time and money are a powerful combination
The benefits of saving early are significant. For instance, a pound saved by someone in their twenties
can carry four times as much purchasing power as a pound saved by someone in their fifties.
So, while there is always time to start saving, the earlier, the better.
Embracing government initiatives
Recent government plans that aim to enhance pension savings include extending the employer
pension scheme auto-enrolment (AE) to employees from the age of 18, down from the current age
of 22. Plus, the lower earnings limit of £10,000 is set to be removed.
A lifeline for young workers
These changes could significantly benefit the youngest workers, especially those in lower-earning
groups. They could see their pension pots boosted by an impressive 150% by starting to save from
their first earned pound.
Bridging the retirement gap
For individuals with a median private pension income of £13,400, this 150% boost could mean an
increase to £20,100 per year. This results in improved retirement outcomes, mainly for disadvan-
taged groups, such as women, disabled people and ethnic minority groups.
The power of starting early
Eliminating the lower age limit could enable an average 18-year-old worker to boost their pension
pot by £5,000 by retirement. According to the Office for National Statistics (ONS), an 18-22-year
old earning an average of £12,000 who starts saving at 18 could retire with £136,000 in their pension.
This is £5,000 more than someone who only starts saving at 22.
Ready to discuss your retirement goals?
Retirement planning is essential to ensure a secure, comfortable and enjoyable life after work. But,
it can be complex and overwhelming without the right professional guidance. That’s why we’re here
to help. Don’t leave your retirement to chance. Take control of your future today. To see how we
can help, please get in touch with us.
Source data:
[1] Research carried out online by Research Without Barriers (RWB) on behalf of Scottish Widows.
All surveys were conducted between 3–4 October 2023. The sample comprised 1,045 UK adults
who have not yet retired. All research adhered to the ESOMAR & UK Market Research Society
(MRS) code of conduct (2023). RWB is registered with the Information Commissioner’s Office and
complies with the DPA (2018). All other data was taken from the Scottish Widows 2023 Retirement
Report, which surveyed more than 5,000 people in the UK.
