In today’s economic climate, many individuals under 40 find themselves grappling with the challenges of saving for a house deposit, coping with exorbitant rental costs, and navigating the rising tide of inflation. As a result, retirement savings often take a back seat in their financial planning. Furthermore, the uncertainty surrounding the future of the state pension—the weekly payment available to those aged 66 and over—adds to the confusion. Nevertheless, there is a persistent emphasis on the importance of starting a private pension as early as possible in one’s career. The i Paper engaged with several young adults across the UK to explore their perspectives on retirement planning.
Cheryl Crossley, 35, Leeds: ‘Putting Aside Extra for a Pension Feels Unrealistic’
Cheryl Crossley, a 35-year-old PR professional from Leeds, considers herself financially sensible, but the current demands on her income make it challenging to contribute more towards her pension. Cheryl lives with her husband and is expecting their first child, which she acknowledges will further strain their finances.
At present, she is uncertain about the total amount saved in her workplace pension or what her retirement forecast looks like. Although she has always contributed to her pension, she has only ever paid the minimum required amount—5% of her salary. “Right now, the savings we’re managing are more focused on moving to a new house or setting aside money for unexpected expenses. We are prudent with our finances, but the idea of putting extra into a pension just seems unrealistic at this moment,” she explains.
Cheryl expresses concern about the future of the state pension, fearing that it may not exist by the time she reaches retirement age or that it will be heavily taxed. “It’s a disheartening thought, and it feels beyond our control, so I try not to dwell on it. Of course, we aspire to retire at a reasonable age like our parents did, but I feel somewhat helpless in influencing that without dramatically altering our lifestyle,” she adds.
She prefers to enjoy life now, opting for occasional holidays rather than leading a frugal existence in hopes of retiring early. “I’ve heard stories of individuals who save rigorously only to face life-altering diagnoses that prevent them from enjoying retirement. To some extent, it’s crucial to focus on the near future—perhaps the next five to ten years—rather than solely on the distant horizon,” Cheryl concludes.
Toby Welton, 22, London: ‘I Have a Few Hundred Pounds Saved – I’m Banking on Earning More Later’
At just 22, Toby Welton, a think-tank researcher, admits that contributing to a pension has proven to be a challenge. As a self-employed individual, any funds he manages to save go into a Self-Invested Personal Pension (SIPP), but currently, he has only accumulated a few hundred pounds. “Pension savings linger in my mind, but the harsh reality is that paying rent takes precedence,” he states.
To bolster his savings, Toby has taken on additional tutoring work, and he also has some funds saved from a previous position as a teaching assistant. “I’m counting on earning a higher income in the future, which justifies my low contribution rate at the moment. However, I also have to consider other financial goals, like saving for a property deposit,” he adds.
Regarding his expectations for the state pension, Toby believes it will exist in some capacity, but he is skeptical about the sustainability of the current triple lock system, which ensures pension payments increase annually based on inflation, average earnings growth, or a minimum of 2.5%. “I’m confident there will be some form of pension available, but I wouldn’t plan around how generous it may be,” he concludes.
Qin Xie, 38, London: ‘A Pension is Only Part of My Retirement Plan’
Qin Xie, a 38-year-old freelance travel writer and the creator of a personal finance newsletter called Money Talk, views her pension as just one component of her overall retirement strategy. While she acknowledges that she could contribute more to her personal pension, she opts for a minimal amount due to her self-employed status and the unpredictability of her income.
“My primary focus is on paying off my mortgage early on the flat I own. I see my pension as just part of a broader retirement plan; I am saving for the future in various ways,” she explains. In addition to her pension, Qin has established a Lifetime ISA, which allows her to save for retirement with the added benefit of government bonuses on her contributions. She anticipates that the value of her property will appreciate over time.
Looking ahead, Qin plans to relocate from London upon retirement, considering either renting or selling her property based on what makes the most sense at that time. “The state pension doesn’t play a significant role in my retirement planning. It feels like a constantly moving target, and living off the meager amount received in London would be a struggle,” she admits.
Qin believes she might increase her pension contributions once she turns 40. “Even if I start saving more seriously for my pension at that age, I’m confident I’ll have built a substantial pot by the time I’m 60, so I’m not overly worried,” she reflects.
