Tag: MoneyHelper

1 in 3 working young people have never contributed to a pension 

  • MaPS calls on young people to pay into their pension, even if they’re only able to contribute a small amount.  
  • 1 in 3 18-25-year-olds who are currently working have never contributed to a pension.  
  • “We want young people to make sure they’re well informed and get into healthy saving habits early on in their careers” says MaPS. 
  • MoneyHelper can support young people to learn about their pensions. 

In a survey of 2,000 UK 18-25-year-olds, MaPS found that 1 in 3 (29%) who are currently working have never contributed to a workplace or private pension.  

Additionally, only just over half (54%) are currently contributing to a pension. 

Among savers (87%), ‘milestone planning’ was the top reported savings priority for young people, with half of 18–25-year-olds (51%) saying they are saving to buy a property, get married, or similar life events. 

Leaving planning for retirement in 6th place, with just over 1 in 8 (13%) reporting that they are saving for this.  

MaPS highlights research from the Institute and Faculty of Actuaries (IFoA) which shows that contributing to your pension age 35 instead of 25 could result in a £500k pension pot instead of £800k, a detrimental loss of over £300k for a retirement pot. 

Jackie Spencer, Head of Money and Pensions Policy at the Money and Pensions Service says: “We understand that not everyone can regularly contribute high amounts to their pension. 

“It’s encouraging that our recent data shows that 71% of young people in full-time employment are contributing to a pension. This likely demonstrates the positive effect of the workplace automatic enrolment, and we’d encourage young people starting new jobs to contribute to their workplace pension.  

“It’s important that young people starting out in their careers know that even a small contribution each month can make a difference to their retirement pot, and something is better than nothing.

“For those currently self-employed or not in full-time employment, try to put money aside where you can for retirement and consider a personal pension. When young people do reach the stage of full-time employment, we’d encourage taking advantage of auto-enrolment into your pension if you can.” 

MaPS understands that not everyone is able to pay into a pension, particularly if they are saving money for other reasons, but it’s important to be well informed when making financial decisions.  

When you are part of a workplace pension scheme, you may be eligible for employer contributions and some of the money that would have gone to the government as tax goes towards your pension instead.  

MaPS’ MoneyHelper website has plenty of free and impartial guides to offer support, including our pension calculator and a webchat tool where young people can access pension guidance.

Working families see resilience plummet to just 19 days

  • The latest Deadline to Breadline report from Legal & General has found UK households’ financial resilience has shrunk by 21% since 2020 (from 24 days to 19 days)
  • People overestimate (by nearly six weeks – actually 41 days) how long they could fund basic living costs (such as housing costs, loans/ credit card repayments, utility bills and food) if they lost their income  
  • Cutting back has become the norm but the 5 million poorest workers in the UK have no financial safety net in the event they lose their salary

On average, working households are only 19 days from the breadline, according to a report from Legal & General. The new research has shown that households have seen the amount of time they can fund basic expenses decrease by 21%, five days less than in April 2020.

Households have average savings of £2,431 and debts of £610. Accounting for average daily expenses of £93, this would see the average household run out of money in less than three weeks if they were to lose their income.

The research found that most people underestimate how long their money would last, assuming they would have 60 days of breathing room were they to lose their job.

With household costs increasing significantly, and more businesses under pressure, this has raised concerns that many people across the country could be especially vulnerable to financial shocks should the worst happen.

Household energy bills, for instance increased by 54% in April 2022, a record increase, and are likely to rise substantially again in October and the New Year. 2

Cutting back ‘the new norm’

While a quarter of households are yet to notice an impact from the increased cost of living, cutting back – on both essentials (69%) and luxuries (81%) – is the new norm. Even the majority of those with no debt and a higher income (over £50k annually) are being more cautious. 61% of those with a household income of over £50k are cutting back on essentials.

Nearly 2 million adults have no money left each month, a rise of 330,000 in the last 2 years. Concerns are particularly high for the UK’s poorest workers. Those earning under £20,000 a year – 5 million people in the UK – are living paypacket-to-paypacket and the average household in this group has no safety net should the worst happen.

Legal & General’s recent Rebuilding Britain Index also found that the cost of living crisis is increasing inequalities between different parts of the country, disproportionately affecting households in areas where there is a greater need for levelling-up initiatives.

Older workers most at risk of overconfidence

Older workers in the UK (55 to 65 years old) tend to have higher levels of financial reserves they can draw on, meeting their expenses for an average of 99 days in the event they lose their income. However, these households are also the most likely to overestimate their safety net, assuming they can manage for at least 180 days.

This raises concerns as older households have less time to build their savings back up before retirement and typically find it harder to find new roles following redundancy. 

Bernie Hickman, CEO, Legal & General Retail, said: “Our latest research presents a challenging picture for working households across the UK. We often talk about managing money month-to-month but, as our findings indicate, for some it’s a case of day-by-day. 

“The cost-of-living crisis is squeezing the purses of people all over the country, leaving households of every shape and size with money worries. The fact is there is only so much people can do to manage their budgets in these difficult times but there are resources available that can help.

“Half of all people in the UK (52%) haven’t taken advantage of financial guidance available, including free services like MoneyHelper, to help make the most of what they have.

“It may feel overwhelming but we encourage people to do what they can now so they are best prepared for a further squeeze on finances coming this autumn.”

Legal & General’s Deadline to Breadline report, published later this year, will explore the financial resilience, security and engagement of working households across the UK.

To help people better understand their money and make informed decisions, the insurance and retirement provider has put together a financial safety net content hub signposting tools and resources.