The UK’s move towards a new flat-rate state pension should highlight the urgent need for a youth savings culture, says the managing partner of deVere United Kingdom, part of the world’s largest financial advisory firm.
Kevin White’s comments come after the government last week unveiled its plans for a flat-rate state pension of £144 a week for everyone by April 2017.
Mr White explains: “This measure, which aims to simplify the UK’s pension system as it is currently one of the most complex in the world, should set some alarm bells ringing.
“Under these plans, from 2017, people will know that they will receive the equivalent of £144 per week from the State to fund their retirement - and should they want more than that, they will have to find the money themselves.
“In this way, young people should take the move towards a new flat-rate state pension as a wake up-call to embrace the concept of saving for their mature years as £7,488 a year in today’s money will simply not be enough for most to be able to enjoy an active and fulfilling retirement.
“The flat-rate state pension makes the message abundantly clear that a failure to save adequately now puts you in danger of having a financially insecure retirement. This is especially important as we’re all living longer, meaning our money has to go further than ever, plus there are ongoing indicators that financial support for older people from the State is reducing – further proof that funding our retirement is increasingly becoming a personal responsibility.
He continues: “The introduction of the flat-rate state pension is a golden opportunity to set out and explain why younger people must save more. We need to better promote the concept of working with a financial adviser to devise a realistic, coherent and efficient plan, as this, studies show, is the best way to reach your long-term financial goals.
“Similarly, it’s vital to stress the point that the earlier you start, the better, as the younger you begin planning and saving for your retirement, the less you need to put away from each pay packet to achieve your aims.
“It should be remembered that there are only 240 salaries for most people in two decades.”