- 31% of 25-34 year-olds want to retire on an annual income of more than Â£30,000 a year *
- They save 18% of monthly disposable income for near-term needs *
- But great expectations for retirement fall short as a mere 12% currently save for older age *
London, 20th November 2012 – Britain’s bright young things save more of their monthly disposable income than any other age group, but fears about the future, spending for fun and the financial pressures of everyday living are contradictory to their expectations for a comfortable retirement.
According to research commissioned by BlackRock, the fund manager, 31% of 25-34 year olds expect to retire on an annual income of more than Â£30,000 a year, higher than the national average salary of Â£26,100**. However, the BlackRock Investor Horizons survey*, undertaken in conjunction with YouGov, found that despite saving nearly one fifth (18%) of their monthly disposable income , higher than any other age group in this survey, only 12% of 25-34 year olds are currently saving for retirement and only 4% of their money is being invested.
The 25-34 age group believes the UK job market and job security pose the greatest risk to their financial wellbeing and confidence, with half (48%) of those surveyed putting money aside for rainy day emergencies. Other near term financial priorities revealed by the survey include 32% are saving to buy a property, 27% are saving for a holiday, and one in ten for a new car.
Tony Stenning, Head of UK Retail at BlackRock, said: “Britons are facing a savings challenge. We’re living longer and saving hard from an early age, but near term needs and uncertainty about the future mean that 79% of these thrifty 30’s are saving in cash and forgetting long term financial security. Cash is a safety blanket but with record low interest rates, Britons could do more to protect their savings against the negative impact of inflation, and consider investing for a better return while understanding any potential risk of moving into other asset classes.”
The survey also revealed that retirement planning is on the radar for those in the 25-34 age group, with 56% of them planning or saving for older age although, as noted above, only 12% are currently saving for retirement. However, a huge proportion (82%) of this group is interested in increasing their financial knowledge.
For a retirement income of Â£30,000 a year, people aged 25 today and retiring at 65 would need to put aside Â£4,950 a year to accumulate a pot of Â£599,967, assuming an annualized return of 5%. If they wait until 35 to start investing, they will have to save Â£9,000 – or twice as much – each year to reach the same goal at the same rate of return. ***
Tony Stenning added: “The stark reality is that putting something aside for old age has become a necessity. But our established savings culture should enable people to plan ahead. By starting early and saving regularly Brits will help themselves build a bigger retirement pot more in line with their expectations for a reasonable income and lifestyle in later life.”
BlackRock recognises in the current economic climate it is a struggle for Britons to save more, but urges savers to think about making the most of their money by:
-Â Â Â Â Â Â Having a goal for financing retirement income
-Â Â Â Â Â Â Seeking independent financial advice to help plan and achieve long term investment needs
-Â Â Â Â Â Â Diversifying savings and investments – “don’t put all your eggs in one basket”
-Â Â Â Â Â Â Investing using tax efficient products such as an ISA or pension
-Â Â Â Â Â Â Investing a regular monthly amount for the long term alongside rainy day and other savings
-Â Â Â Â Â Â Increasing savings in line with pay rises
-Â Â Â Â Â Â Being aware of the effect of inflation which can diminish in real terms the money held in low interest savings accounts