Pension News Pensions Should Be On Savers’ Agenda Before 2012 18471382

Pension News Pensions Should Be On Savers’ Agenda Before 2012 18471382 Fair Investment

Pensions should be on savers’ agenda before 2012

18 October 2010 / by Paul Dicken

Waiting for new legislation that will automatically enrol employees into a pension scheme could mean missing out on over £40,000, according to an investment management firm.

Fidelity research predicts that a 25-year-old saving £100 a month now could end up £41,000 better off than if they waited until 2012 when the National Employment Savings Trust is expected to be introduced, providing auto-enrolment for workplace retirement savings.
If a 25-year-old were to start investing £300 a month from now they could be up to £123,000 better off than if they put off retirement planning until 2012.

Fidelity based the figures on a hypothetical fund investing 40 per cent in equities and 60 per cent in bonds, assuming a 2 per cent inflation rate and 1.5 per cent annual salary growth above inflation.

Although the coalition government is reviewing how auto-enrolment will work, it is expected to commence with an auto-enrolment scheme, originally proposed by the previous government.

Head of UK defined contribution at Fidelity, Julian Webb, said: “The government’s new pension scheme, known as NEST, will see a big shake up for both companies and employees but a real concern is the prospect of people sitting back until they are compelled to save – especially when many may be tightening their belts because of the uncertain economic outlook.”

Webb said starting early not only meant building up a bigger savings pot for retirement but also helped investments recover from falls in interest rates and stock markets.

Urging anyone with access to a company pension scheme to consider joining, Webb highlighted the tax relief available on contributions to pension schemes.

“With the average employer contributing 6.1 per cent of gross salary to a private pension scheme, anyone on the average wage of £25,428 could get, free, an extra £129 a month. If they choose to add in their own money as well then the government will bump this up with tax relief,” he added.

© Fair Investment Company Ltd

Written by Editorial Team