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Purnell: Twentysomethings closing in on financial ruin

13 July 2006
Minister for Pensions Reform James Purnell has told the Institute of Public Policy Research that young people today face the prospect of a vastly underfinanced retirement if they do not change their savings habits.

Mr Purnell said that in the last five years, the proportion of 20 to 29-year-olds contributing to a private pension fund has fallen from one in three to one in four, meaning that many people may find themselves short when they come to retire.

The Pensions Commission estimates that 3.7 million people between 26 and 35 are not saving enough or even at all.

"At the moment young people are acting as if they expect to be able to fund a longer and longer retirement with less and less saving," Mr Purnell said.

"It is striking how fast time spent in retirement is lengthening. In 1950, the average retirement lasted about ten years; today it's around 20; [and] in 2050, if we didn't increase the state pension age, it would be around 25 years."

Mr Purnell claimed that the government's reforms, particularly the proposed auto-enrolment scheme, would "tackle the inertia which can stop people saving".

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