Under-60s are hugely unprepared for covering the costs of their retirement. A survey of workers in the City of London revealed not only a general attitude of inertia but also a huge gulf between those who are confident they're on track to achieve the retirement they've dreamed of, and those who have adopted a head-in-the-sand approach to retirement-planning.
"I don’t think about saving for my pension, I think about saving for my bathroom," said Helen, a 31-year-old IT manager. Grace, a 38-year-old lawyer said she knows she needs to put money aside for her retirement but she hasn't yet done anything about it. And Jon, a 44-year-old events manager, told Morningstar.co.uk that he expects his future self to take the attitude of 'well I might be broke now but at least I had a good time'.
Expectations of how big a pension pot will suffice also showed severe divergence, ranging from £60,000 – which for someone who retired at 67 and lived to 87 would cover annual living expenses of just £3,000 – to multi-millions. While most said they didn't yet have a plan to save for their retirement, the responses from those who have started saving highlighted the benefit of starting early. Steve, a 46-year-old company director said he has his retirement "sorted". Steve started saving into a pension in his mid-20s with the help of a financial adviser and now believes he's on track to achieve a £5 million nest egg.
Though investment performance and charges play a part, the two most important factors when saving for retirement are how much you pay in and how long you save for. Start saving at age 22 instead of age 25 and you’ll increase your pay-out by around 20%, thanks to compound interest, but delay your starting point from 25 to 35 and you’ll end up with around 50% less.
See the 'Related Articles' on the right for guidance on how to start saving to fund your retirement.