The importance of saving early for a pension: Why younger generations aren’t doing enough

Analysis of the Financial Conduct Authority’s (FCA) Financial Lives Survey has revealed a significant trust and engagement gap in pension savings, particularly among younger adults.

Trust in pension providers is lowest among 25-34-year-olds according to the FCA’s data, with 43 per cent scoring their trust as six or less on a scale of 1 to 10.

This is concerning, as younger individuals will largely depend on Defined Contribution (DC) pensions for their retirement income which require careful management throughout their lifetime.

The engagement gap

The FCA’s survey also found that 27 per cent of adults had very low engagement levels with their DC pensions.

This percentage leaps to nearly half for those aged 18-24 and remains at a third for those aged 25-34.

Low engagement can result in inadequate action towards saving sufficiently for retirement or even opting out of pension plans altogether.

Why start saving young?

Starting a pension savings plan early offers the power of compound interest, giving your contributions more time to grow.

The longer you wait, the more you’ll need to save later to catch up. If trust and engagement issues deter younger people from initiating or contributing to their pensions, they risk a less secure and comfortable retirement.

Greater trust and active engagement with pension plans can lead to better-informed decisions and higher contribution levels.

This is especially crucial for younger people who stand to gain the most from early and consistent investments in their retirement funds.

By addressing trust and engagement issues now, younger generations can take the essential steps needed for a more secure future.

Given that retirement may be several decades away, even a small, consistent contribution can make a substantial difference in the long term.

The data serves as a wake-up call for younger people to overcome scepticism and disengagement, and to recognise the significant long-term benefits of starting their pension savings early.

Whether you or a loved one is yet to start preparing for retirement and would like independent financial advice, please speak to us.

Posted in Blog, Wealth Management News.