Malcolm McLean: Younger staff should pay more attention to pensions

Worrying what their financial standing might be in 40 or 50 years’ time is not something you would have thought would trouble most young people unduly.

Although one recent poll did suggest there is a growing anxiety among some in their 20s about possible income shortfalls and healthcare problems for their generation in old age, there is no evidence that the need to pay into a pension plan at a young age is still yet fully appreciated.

There are also many practical difficulties. It is impossible not to be extremely sympathetic to the plight of today’s youngsters struggling to get a foothold in the jobs market and, in the case of a good number of graduates fresh out of college or university, saddled with hitherto unthinkable levels of debt.

It is only natural that they should attempt to sort out credit card and other expensive debt repayments at the earliest opportunity, as well as thinking about getting a deposit together to buy a home, acquire a mortgage, start a family, and so on (all of which is likely to consume a lot of their money in the short and medium term).

And yet, as Barnett Waddingham’s own research has clearly demonstrated, it is an inescapable fact that starting a pension plan in your 20s instead of your 40s makes a massive difference to your eventual pension income. Also, turning away free money where available in the form of the employer’s contribution and government tax relief makes no sense whatsoever and surely should be contemplated only in the most exceptional of cash-strapped circumstances.

As auto-enrolment rolls forward and millions of workers are given access to a workplace pension scheme for the first time, we must continue to bang the drum for pensions and encourage young people in particular to make an early start to the many years it inevitably takes to build up an adequate pension fund.

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With seemingly ever-increasing life expectancy and a rapidly ageing population, it is in the country’s interests, as well as their own, that they do so. 

Malcolm McLean is a consultant at Barnett Waddingham