New research from Legal & General Retail has found that almost a fifth (17%) of young savers (those aged 22-32) hope for an early retirement before the age of 601, with 70% expecting to retire before the current state pension age of 67.
Young workers have high hopes for an early retirement
Based on new modelling from Legal & General, young savers would need to be adding a further £312 a month on top of the average 8% contributions to their workplace pensions to meet their retirement goal2. This represents an additional 14.25% of monthly income committed to a workplace pension.
To retire by 67, the current state pension age, these younger savers would still need to be contributing an additional 3.5% to their workplace pension, amounting to a further £72.50 a month, even with a state pension boost of £10,600 per year upon reaching retirement3.
Small changes can make a big difference
Putting away an additional £312 a month in pension contributions is out of reach for most young savers, however the power of compound growth means that even small changes made early can have a significant impact on people’s retirements. Putting just £30 extra away a month from the age of 27 could see someone with £100,000 more in their pot by the time they reach the current state pension age.
Katharine Photiou, Managing Director of Workplace Savings at Legal & General: “The most powerful tool young people have on their side is time. While retiring before 60 is still unlikely for most, putting even a little more money aside early in your career is still a good approach which will allow you to set yourself up for the best possible retirement.
“Auto-enrolment has been a huge success, which has prompted millions more people to start saving. However, we might want to consider further changes that will ensure people have enough set aside to guarantee an adequate income in retirement. The announcements in last week’s Autumn Statement do not directly address the pressing issue of adequacy – people are simply not saving enough to meet their aspirations for retirement. Increasing the minimum contribution rate to 12% would give most savers the means to retire at 67 with a moderate standard of living, according to our modelling.”
To help guide young people on everything they need to know to manage their money in their twenties and early thirties, Legal & General have recently launched a range of resources. Its new TikTok account @legalandgeneral provides bite-sized money guidance. Meanwhile, the new podcast A Little Bit Richer, launched in September, and covers everything from making sense of your payslip, to mortgages and pensions, to financial wellbeing and mental health. This can be downloaded from Legal & General’s official site or through your preferred podcast listening app.
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