If you want to retire, start saving now
If you’re expecting to retire comfortably on a state pension you will be very disappointed. You need to start saving. And you need to start saving now.
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I am bemused by the coverage of George Osborne's announcement that henceforth the state pension age will rise with life expectancy, which suggests that today's young will not get their pension until they are knocking around 70. Anyone born this year might end up waiting until they are 77, and those born in 2050 until they are 84 (PWC numbers).
The papers were instantly filled with pictures or perfectly prosperous-looking young people sadly noting that "we may never enjoy retirement". Alongside those came laments from columnists across the political spectrum pointing out that, while we might be living longer, we aren't necessarily living healthier. What if we can't actually cope with working that long, they asked?
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No one who has even the vaguest understanding of how the UK's public finances work and will work (there isn't enough money) is even thinking of relying on their state pension. They know that's just not an option. They're saving now so they can retire when they feel like it. That means auto enrolling in company pensions as soon as possible and adding to the minimum as much as possible from as early an age as possible.
Then, when you have a reasonable amount in your pension pot, saving as much into ISAs as possible (I'm nervous of a new pension tax). How much and how soon? Save £200 a month from the age of 20, see it return an average of 5% a year and you will have a lump sum of around £405,000 when you retire at 65. Start at 40 and save double that and you will only have £238,000.
Start early, even if you have to start small.
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The most popular fund sectors of 2025 as investor outflows continueIt was another difficult year for fund inflows but there are signs that investors are returning to the financial markets
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Our pension system, little-changed since Roman times, needs updatingOpinion The Romans introduced pensions, and we still have a similar system now. But there is one vital difference between Roman times and now that means the system needs updating, says Merryn Somerset Webb.
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We’re doing well on pensions – but we still need to do betterOpinion Pensions auto-enrolment has vastly increased the number of people in the UK with retirement savings. But we’re still not engaged enough, says Merryn Somerset Webb.
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Older people may own their own home, but the young have better pensionsOpinion UK house prices mean owning a home remains a pipe dream for many young people, but they should have a comfortable retirement, says Merryn Somerset Webb.
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How to avoid a miserable retirementOpinion The trouble with the UK’s private pension system, says Merryn Somerset Webb, is that it leaves most of us at the mercy of the markets. And the outlook for the markets is miserable.
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Young investors could bet on NFTs over traditional investmentsOpinion The first batch of child trust funds and Junior Isas are maturing. But young investors could be tempted to bet their proceeds on digital baubles such as NFTs rather than rolling their money over into traditional investments
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Negative interest rates and the end of free bank accountsOpinion Negative interest rates are likely to mean the introduction of fees for current accounts and other banking products. But that might make the UK banking system slightly less awful, says Merryn Somerset Webb.
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Pandemics, politicians and gold-plated pensionsAdvice As more and more people lose their jobs to the pandemic and the lockdowns imposed to deal with it, there’s one bunch of people who won’t have to worry about their future: politicians, with their generous defined-benefits pensions.
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How the stamp duty holiday is pushing up house pricesOpinion Stamp duty is an awful tax and should be replaced by something better. But its temporary removal is driving up house prices, says Merryn Somerset Webb.
