Pensions expert Emily Jacobs is urging parents to think about their children’s pensions and to educate them about saving by putting away a few pounds each month.
With severe pressure on state pensions and people facing paying tens of thousands of pounds in social care bills, the onus to save for retirement is growing year on year.
Emily, a Director of Richard Jacobs Pensions and Trustee Services, is already saving £20 a month for Oliver, her five-year-old son and if this is sustained through adulthood, with uplifts to take into account inflation, it will yield a pension pot of £309,000 which is higher than the average pension pot in the UK.
“Financial education is in many ways as important as the core topics on the school curriculum and I urge parents to teach their children about the need to save and, if possible, put a small sum away each month to start their pension pots,” said Emily.
“The introduction of auto enrolment for pensions has begun the process of educating everyone that we all need to save what we can and has shown that putting a little aside every month works, but the key is to start as a young adult, at the very latest.”
A report by The Alzheimer’s Society, released on 8 July, 2019, calculates that people with dementia have spent almost £15bn of their own money in the last two years.
But how much is enough when it comes to saving for your old age?
A study by investment firm AJ Bell shows that Britons will need to reach retirement age with a pension pot of nearly £450,000 to have a decent retirement if they are lucky – or unlucky – enough to live until 100 years old.
The study assumes someone on an average annual UK salary of £28,000 who wants to retire at 65 years old and who wants an annual retirement income of £20,000.
For funds to last 35 years until the age of 100, the private pot would need to generate a starting income of £20,000 a year, which would increase at 2 per cent to remain inflation-proofed.
To save the £447,000 pension pot, AJ Bell estimates that a 25-year-old would need to save £235 a month. Delaying by 10 years to start saving at age 35 sees the monthly saving figure almost double to £428 and if savers wait until age 45, the figure rises to a much higher £859 a month.
Richard Jacobs Pensions and Trustee Services Ltd is authorised and regulated by the Financial Conduct Authority, please go online to http://jacobs-pensions.co.uk/.