Many young people are putting their long-term financial security in jeopardy by preferring to clear debts or go on holiday rather than considering what to do when they retire.
Research of almost 600 18- to 34-year-olds showed that a quarter of those surveyed would opt out of the government’s proposed National Pension Savings Scheme (NPSS) to be able to pay off bills.
One in five of those questioned by consultants JP Morgan Invest said they never thought about pensions at all, despite almost half (49%) admitting to being worried about how they would fund their retirement.
The government estimates that about seven million people in the UK are not saving enough for their retirement.
In its White Paper in May the government confirmed that it would be setting up the NPSS system suggested by the Pensions Commission. The scheme would require employers to pay 3% and employees 4% of their wages into the fund unless employees decided to opt out. A further 1% would be added through tax relief.
JP Morgan Invest director, Jonathan Watts-Lay, said the statistics showed that young professionals had a poor grasp of exactly how their long-term financial security would be affected by their lack of pension planning.
“Understandably, people in the 18-34 bracket would rather concentrate on their short-term financial obligations rather than look at the bigger picture and think about what standard of living they want to enjoy when they retire,” he said. “This is particularly relevant in the current climate of record mortgage and credit card debt, as people might have no option but to opt out of a national pension scheme to cover pressing debts.”
He called employers to offer financial education to help employees manage debt effectively and to stop them being forced to opt out of pensions provisions.
