Young workers dismissive about need to save for retirement

Jul 12 2006 by Nic Paton Print This Article

Young Britons are putting short-term goals or desires ahead of planning for a financially secure retirement - and it is partly up to managers to show them the benefits of longer term financial planning.

Research by JPMorgan Invest has found that a quarter of 18 to 34-year-olds would choose to opt out of the British government's proposed National Pension Savings Scheme to save for a holiday or pay off debt.

The scheme was proposed by the British government in May following its recommendation by the Pensions Commission as being one way to help solve the country's pensions' crisis.

The scheme will require employers to pay 3 per cent and employees 4 per cent of their wages into the fund, unless employees actively decide to opt out. A further 1 per cent will be added through tax relief.

Just as worrying for the country's long-term future, the study also found that one young worker in five has never even thought about saving for a pension.

Despite this, large numbers of 18 to 34-year-olds are worried about poverty in their retirement – with 49 per cent expressing concern about how they will find money once they have stopped working.

"The statistics show that young professionals have a poor grasp of exactly how their long-term financial security is going to be impacted by their lack of pension planning," warned JPMorgan Invest director Jonathan Watts-Lay.

"UK employers have an important role to play to help their workforce understand the full implications," he added.

"Understandably, people in the 18-34 bracket would rather concentrate on their short term financial obligations rather than looking at the bigger picture and thinking about what standard of living they want to enjoy when they retire," he continued.

"This is particularly relevant in the current climate of record mortgage and credit card debt as people might have no option but to opt out of a national pension savings scheme to cover pressing debts," he added.

Bosses and managers needed to be offering their employees advice on how to manage debt effectively while planning for the future, he suggested.

In doing so, they could also stop them from being forced to opt out of pensions, he predicted.

The company has calculated that employers could spend up to £150 per employee per year on pension education without a tax charge for either the employer or the employee.

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