State pension overhaul could transform young people's attitude to saving

Making the state pension simpler could spur millions of younger people to save more towards their retirement, new research shows today (MON).

A Populus survey for the National Association of Pension Funds (NAPF) found that half (47%) of those aged between 18 and 34 - more than six million people - would save more for their old age if they knew how much state pension they would get.

Surprisingly, younger people felt much more strongly than older age groups about a better state pension. Joanne Segars, Chief Executive of the NAPF, said:

“They’re keen to take more control of their retirement, but they need a clearer state pension foundation on which they can build their own nest egg.

“If they could see the state offer might not be enough, they’d be more inclined to get their own savings sorted, partly to avoid working past an increasing retirement age.

“The current system is a dog’s breakfast and makes it impossible for people to plan their future. Even pensions experts struggle to work out what they’ll get, so what hope does Joe Public have?”

The Government is currently thinking of simplifying the system and introducing a more generous flat-rate pension guaranteeing the equivalent of £140 a week in today’s money.

The Populus survey revealed:

• Half (48%) of 18 to 24 year olds and 47% of those aged 25 to 34 said they would save more if they knew exactly what to expect from the state pension. That fell to 38% among those aged 35 to 44, and 33% for those 45 to 54.
• On average, those aged 18 to 24 who would pay more into their workplace pension said they would save an extra £41.06 a month, rising to £47.96 for 25 to 34 year olds. The average across all age groups was £59.51.

The results are significant because pension saving is especially low among younger people and first jobbers, who are often struggling with debts or saving for property.

Government figures show 78% of 18 to 24 year-olds, and 43% of those aged 25 to 34 are not saving for their retirement. A simpler state pension could help them work out what they need to save for themselves.

The current UK state pension is one of the lowest and most complicated in Europe. The system of pension credits and a state second pension makes it very difficult to estimate what an individual’s state pension will be.

The Populus survey showed almost two thirds (63%) of those aged 18 to 24 said not knowing what they would get from the state makes it difficult to plan for their old age, rising to 70% for 25 to 34 year olds.

Joanne Segars said:

“It can be a big ask to get someone in their 20s thinking 40 years ahead. The proposed reform of the system would be a huge improvement, but changes must stay in place over the long-term.

“We have to get younger people switched on to their financial future. Starting a pension early can make a massive difference to the final size of a retirement pot. A clearer state pension will bring more young people into the habit of saving.”

 

Notes to Editors:

1. Joanne Segars is available for interview.

2. Populus interviewed 1,526 adults online who have not retired in Britain between 3rd and 5th June 2011. The key findings are attached, or are available from the NAPF press office.

3. The NAPF is the leading voice of workplace pensions in the UK. We speak for 1,200 pension schemes with some 15 million members and assets of around £800 billion. NAPF members also include over 400 businesses providing essential services to the pensions sector.

4. Government statistics quoted are from the Department of Work and Pensions research Attitudes to Pensions: The 2009 Survey.

5. Population numbers are based on Mid-2009 Population Estimates released by the Office for National Statistics

Contacts:

Paul Platt, Head of Media and PR, NAPF, 020 7601 1717 or 07917 506 683. [email protected]

Christian Zarro, Press Officer, NAPF, 020 7601 1718 or 07825 171 446, [email protected]