Pension contributions aren’t a financial priority for savers until they reach their 50s according to the latest research from Standard Life.
It found younger people were far more likely to prioritise saving for home ownership, family finances and the problems of managing debt and day-to-day finances.
This research looked at how customer’s financial priorities shift as they move through life, with each life stage characterised by their own pressing issues.
Saving for a home is the top priority for those 18-34, which tallies with the average age of first-time buyers now being 34. However at the among the younger end of this age group, those in the teens and twenties saving for holidays was also an important consideration.
As savers start to take on the financial responsibilities of a mortgage mortgages, paying off debt become the number one priority between the ages of 35 and 39, and stays in the top three until the age of 54.
Other more middle-aged considerations start to emerge, with the cost of supporting children and day-to-day living costs ranking highly between the ages of 35-50.
It’s only once savers hit the age of 50 that pension contributions move into their top three financial considerations. The research found that saving for a retirement remains at top priority until the age of 59 when it starts to diminish again.
The research found that this shifting priorities potentially risked those in the 40s falling into a ‘pension gap’. It points out that despite not being a priority most younger workers will end up making pension contributions for most of their working lives, thanks to auto-enrolment.
At the other end of the scale many of the older workers in this survey will have benefits from some DB pensions, at least earlier in their career.
It says that there is a danger that many people in their 40’s – who rank pension saving fairly low as a priority – will be caught in the gap between the decline of DB pensions and the introduction of AE.
Recent research by Standard LIfe found that baby boomers and those over 60 were almost twice as likely (39 per cent) to have a DB scheme than Gen X-ers aged between 44 and 59 (22 per cent).
Standard Life retirement savings director Mike Ambery says: “It’s not unusual for pensions to take a backseat to more immediate financial priorities until later in life. This isn’t necessarily a problem, as long as you’re keeping an eye on your pensions savings along the way and making conscious decisions about your retirement when necessary.
“In an ideal world, starting early and increasing contributions gradually in line with any pay rises or financial boosts like bonuses can make a huge difference to your eventual pot and resulting retirement income. However, it’s never too late to increase your contributions.
“ We recently calculated that someone who chose to increase their pension contributions by 3 per cent to a total of 11 per cent (8 per cent employee, 3 per cent employer) from the age of 45 could build up a pot £32,000 bigger than someone who contributed the minimum level through their career, in today’s prices.”