Straining under the weight of mortgage payments, credit card debts and student loans, pension saving is slipping down the list of priorities of today's young families. Yet the longer they put off retirement saving, the more the gap between the pensions they can expect and those enjoyed by their parents grows.
UK pensions have hit an all-time low, according to research from Scottish Widows, with only 46pc of people saving enough for their retirement, five percentage points down on last year and a fall of eight percentage points from 2009. More than one in five, 22pc, are putting aside nothing at all for later life.
While pension saving is falling, the amount people believe they need to be comfortable in retirement is actually rising, with £24,500 the average level of annual income people would feel comfortable living on at age 70, compared with £24,300 in 2011, according to the report.
But the reality is that low pension saving is leading to increasing numbers of people working longer. The number of people still in jobs after state pension age has almost doubled over the past decade, from 753,000 in 1993 to 1.4 million in 2011, according to new figures from the Office for National Statistics. These figures come just weeks after a report from insurer LV= predicted that more than 6 million people were on course to retire on less than the minimum wage.
Calum and John Laurie, both of West Lothian, are a perfect example of the way retirement expectations are in decline. Calum, a 57-year-old retired police officer who still consults for the force, has an index-linked pension of two thirds of his salary, which he has been receiving since age 49. John has no pension at all so far, even though at 33 he is just 16 years younger than the age at which his father retired. He expects to have to work until he is 69 at least, and will not receive any state pension until a year earlier.
Father and son's different experiences of finance reflect the changing face of our society. "Things were so much simpler when I was a young man," said Calum. "Credit was so much harder to get and when I joined the police you were simply enrolled into the scheme with no opt out, so there was no question of not having a pension."
Retirement planning is less straightforward for John, a father of two who runs his own outdoor fitness business. John has seen the credit binge of a decade ago catch up with him, and has little spare cash to pay into a pension. With credit cards, student debts and car finance loans compounded into a £23,000 second charge on top of his £130,000 mortgage, he is struggling to find the cash to contribute into a pension.
He has done well out of getting on the property ladder early a decade ago, although his current home, which cost £230,000 two years ago, is now worth £205,000. He would like a retirement income of £20,000 in today's terms, yet to achieve that he is going to have to save more than £350 a month in a pension, assuming he receives a state pension of £7,000 a year. If he delays starting to save by five years, the amount he will need to save will rise to £456 a month.
John said: "Financial products are more complicated now than when my father was a young man. These days you have to make your own choices, whereas in his day it was all done for you. For many years I was not offered a pension because I was not senior enough, and, for those periods when I have been, I have thought I would not be around with this employer long enough to make it worth it.
"The other big difference from my father's generation is that credit was easy when I was in my teens and early twenties. Everything was supposed to be OK because the equity in your house was supposed to pay for it all. I had a fantastic time on credit cards and there was no warning that you needed to rein it in. Then the credit crunch came. The monthly mortgage payments are really biting now and the idea of forking out even more on a pension will leave us really stretched."
But John accepts that the longer he leaves it, the harder saving for a decent retirement will be. "For years I thought I could rely on property for my long-term future. I now accept that a pension may be what I need to do," he said.
Post : A father's and son's tale
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