Young people often put the idea of saving for a pension to the back of their minds, focusing instead on spending for the here-and-now; however, starting to save for a pension as early as possible can make a dramatic difference to your income by the time you reach retirement age.
Here are some valid reasons why pension savings should be prioritised for young workers.
Your money will grow
The sooner you start putting money into a pension fund, the more time it has to grow over the years, meaning you can afford to be a bit more flexible when it comes to choosing when to give up work as you near retirement age. Even just devoting a few pounds each month out of your salary for your pension pot will make a significant difference over a number of years.
Benefit from auto-enrolment
The new pension rules regarding auto-enrolment mean that employers are obliged to contribute payments into employee pension funds. The charges made for employer funds tend to be lower than individual ones, so it is well worth taking advantage of auto-enrolment for the long-term benefits. The contributions made by one employer can differ from another, so don’t be afraid to find out what these are next time you go for a job interview.
Paying into a pension scheme enables you to benefit from tax relief, which means more money goes into your pocket and not the government’s purse; in addition, the earlier you start to save, the more likely you are to be able to ride out the highs and lows of investment markets over a longer stretch of time.
Fewer final salary pension schemes
Not so long ago, workers approaching retirement age could benefit from generous final salary pension schemes; today, these are becoming harder to find as employers increasingly switch to defined contribution schemes. This newer breed of pension scheme is not as generous as the final salary pension scheme; therefore, if you want to enjoy your retirement, you will need to put more money in earlier to live comfortably in your later years.
Uncertainty of the state pension
As more people are living longer, pressure on the state pension will mount, meaning that one day this allowance may no longer be viable; at the very least, the age at which you can claim it will continually rise. With uncertainty over the future of the state pension, it makes sense to safeguard your retirement income by starting to save at an early age.
Enjoy your retirement
If you have worked hard all of your life, you deserve to enjoy your retirement and reap the benefits of the effort you have put into your career; however, if you don’t have any pension pot to fall back on, this could mean you have to keep working for longer than anticipated. Saving as early as possible for your retirement gives you the option to choose when to retire. When you do give up work for good, it will also mean you can enjoy your later years in relative comfort.
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