While deemed encouraging that the younger generation are considering their pensions, Quantum Advisory’s pension expert Stuart Price, looks at the wider issue concerning the millennials investing in their future: “Of course it is good news that youngsters are thinking about where to invest their contributions and it’s crucial that we keep them engaged and educate them about the importance of saving for their retirement. The earlier they start making plans, the bigger impact it will have on their eventual retirement income, which is particularly important as we are expecting the State Pension Age to continually increase in the future.
“However, a recent Office for National Statistics survey stated that presently the average being saved was only just over 4% (1% employee 3.2% employer) which is nowhere near enough. In my view, more importantly than investing ethically, is actually getting the millennials to save more for their retirement.
“The introduction of the Pensions Dashboard, which is planned for release in April 2019, should make a real difference in highlighting the need for everyone, specifically those new to the workplace, to increase contributions. My rule of thumb is that the total contribution required for a defined contribution arrangement is half your age, so, if you’re 30, you should be investing at least 15% of your wage into your pension pot.
“As auto enrolment minimum rates are raised in April 2018 and April 2019, we will no doubt see these average rates increase, plus it’s highly likely the Government will raise these figures again after carrying out a review of workplace pensions, which we expect to happen in the near future. Key to these plans succeeding will be the education of the younger generation to ensure they understand why the amount required has to go up and deter them from opting-out of saving for their retirement.”
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