Right now your pension might seem a million miles away. If you’re fresh out of college or in your 20s, you’re probably more concerned with making rent that saving up money for retirement.
With rising accommodation rates, extortionate food prices and even a glimmer of a social life your wages can disappear pretty quickly (i.e. two weeks into the month).
You’ve got almost 40 years to worry about your pension anyways. Heck, you might even have 45 if the retirement age keeps rising.
Yup, that’s what I thought too. Until I read the new statistics that were released this week. Brace yourselves!
According to the Office for National Statistics in the UK membership of workplace pension schemes has reached record highs. 73% of employees now contribute to a company pension scheme, up from less than 47% in 2012.
The increase in pension scheme membership had been most dramatic among younger and low-paid workers according to the data. Experts believe that a new duty on employers to enroll eligible staff automatically into a workplace pension is the reason behind the spike.
However, that doesn’t mean our generation will be able to skip off into a nice luxurious retirement.
The introduction of auto-enrollment has its downsides. According to the ONS pension contributions have ”clustered” at the minimum levels required by law. In the past that was 2% of pensionable salary, however, it was increased 5% in April this year.
In 2017 nearly half of private sector employers with defined contribution pension schemes contributed less than 2% of employees’ pensionable earnings compared to 6% in 2012.
“Today’s ONS data clearly shows the success of automatic enrolment with a large increase in the number of employees paying into a pension compared to 2012,” said the Pensions and Lifetime Savings Association.
“However the data also highlights that many of those saving are doing so at the minimum level. While the government’s phased increases will see minimum contributions rise to 8% by 2019, there is a still a risk that this will not be enough to allow savers to live comfortably in retirement.”
So, if you see yourself retiring to a chateau in the countryside, you better start saving a lot more money.