The cost of a comfortable retirement in the UK is increasing. However, a significant number of young people still don’t have any savings. New research by Hargreaves Lansdown, reveals that not understanding the process of saving for retirement is one of the biggest barriers young people face.
Thankfully, Helen Morrisey, senior pensions and retirement analyst at Hargreaves Lansdown, has several tips to help more young people get organised when it comes to their pensions.
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70% of young people don’t understand their pensions!
The research by Hargreaves Lansdown reveals that 70% of young people find their pensions difficult to understand. As a result, 24% of under 35s claim to have no pension savings at all!
With inflation rates continuing to rise, saving for retirement in your 20s is more important than ever! Therefore, it is vital that young people are encouraged to take control of their pension pots and start saving.
How to increase pension enthusiasm
One of the biggest problems that young people face is a lack of enthusiasm for saving for retirement. This is partly due to the fact that the prospect of retirement seems so far away. As well as this, complicated processes can put them off checking up on their pot and making an effort to improve it.
Therefore, it is important that pension providers tackle these issues and increase the pension contributions younger people make. According to Helen Morrissey, there are three steps that could help.
1. Pension dashboards
Pension dashboards could be the way forward for young people. A dashboard is a solution that enables young people to see all of their pension information in one place. This makes it easy to understand exactly how much they have saved, and also provides easier access to useful tools.
For optimal effectiveness, Morrissey says that these dashboards need to be interactive. Therefore, pensions dashboards should provide users with a range of features that can be used to help young people better understand their pension options.
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2. Highlighting the impact of saving for retirement
Many young people fail to engage with their pensions because the prospects of retirement seem so far in the distance. One way to alleviate this hurdle is to educate young people about the importance of saving at a younger age.
The cost of retirement is increasing, and the sooner young people begin saving for retirement, the more comfortable that retirement will be. Young people should be made aware of the true cost of retiring and the risks involved with starting a pension late.
3. Education and resources
Unless you are a finance professional, understanding the world of pensions can be very difficult! Therefore, workplaces should consider offering pension education to their employees. This could help to overcome any confusion surrounding saving for retirement and could encourage younger workers to look at their pots.
Pension calculators are a great tool that employers should be encouraging their employees to use. It is also a good idea for employers to make clear the contribution that the workplace will provide to employees.
As a result, employees would be in a better position to make decisions about their own pension contributions. With more education about the importance of saving for retirement, young people may feel inspired to take control of their pensions.
