[Matt F]

I think what’s clear is the cost of delay.

The (very basic) figures I’ve done show that if I put £500 gross into a personal pension than with 10% pa growth and an annuity rate of 7% I’d get an income of £32K per year. Don’t forget that inflation would reduce this in real terms but it’s still a decent income nonetheless.

HOWEVER – for a 25 year old to achieve the same benefits at age 60 they only need to contribute £116 per month! Okay so inflation will have a greater effect because we’re looking at 35 years to retirement instead of 20 but the effect is still dramatic. Once you take off tax relief you are looking at something like £25 per week – is that too much to pay for a half decent retirement income? I suspect plenty of 25 year olds spend that and more on a night out – I know I did.

As for what the state provides, unfortunately, demographics means that there won’t be enough earners in 20 years time to pay the kind of benefits the retired enjoy today, hence the increasing of the state pension age to 68. The biggest problem with the system is that there is no investment – our taxes today go straight out in pensions – but that’s a vicious circle that is very difficult to break.

One thing’s for sure, if you are going to rely solely on the state pension at retirement then your income will be pretty poor. I genuinely feel for those not in a position to make private provision as I do for the current crop of pensioners who have seen their pension income failing to keep pace with the cost of living thanks mainly to inflation busting council tax rises.

Matt.