Pensions pressures bear highest on young people

20 October 2010

The Chancellor has announced, in his Comprehensive Spending Review, that contributions to public sector pensions will have to rise but the detail of where the burden will fall has yet to emerge. More notably, he has decided to bring forward the increase in state pension age to 66 for both men and women within a decade. This all means that most people will have to work longer or save more to have the same expectations in retirement.

Saving more will be tough for the young, who are also now facing the pinch prospect of rising tuition fees for their higher education. Personal debt, currently standing at around £1.5 trillion, is likely to rise as students incur greater debts through university. This will only delay the time that a student can contemplate saving for retirement through a pension.

The Actuarial Profession has calculated that debt-strapped students now delaying saving until they are 40 would have to invest 38% of their salary to achieve a pension of just half of their final pay from the age of 66 even if investments earn 4% a year above inflation. If investments only earned 2%, they would need to be investing an impossible 50% of their pay.

Commenting on this, Peter Tompkins, of the Profession, said: “These figures are stark and paint a worrying picture for young people. Pensions and retirement age are a very emotive issue; the scenes in France demonstrate this. Our concern is that if the abilities of people to provide adequately for their own future are hampered then attempts to move pensions responsibility to the individual will also suffer.”

- ENDS –

Enquiries: Tel. Michael Scanlan on 020 7632 1453 / 07798 804 871 or email michael.scanlan@actuaries.org.uk

Notes for editors

The figures if an individual were to start saving at age 30 are 24% of their salary if investments earn 4% a year above inflation and 34% if investments earn 2% above inflation in order to achieve a pension of 50% of final salary.
Actuaries provide commercial, financial and prudential advice on the management of a business’s assets and liabilities, especially where long term management and planning are critical to the success of any business venture. They also advise individuals, and advise on social and public interest issues.
Members of the Profession have a statutory role in the supervision of pension funds and life insurance companies. They also have a statutory role to provide actuarial opinions for managing agents at Lloyd’s.
The Profession is governed by the Institute and Faculty of Actuaries. A rigorous examination system is supported by a programme of continuing professional development and a professional code of conduct supports high standards reflecting the significant role of the Profession in society.
The Profession is available to provide expert comment to the media on a range of actuarial- related issues, including enterprise risk management, finance and investment, general insurance, health and care, life assurance, mortality, and pensions.

You are here