18 August 2008
Pension firm Legal & General (L&G) has warned against
people putting off saving for their retirement as a reaction to the
current economic situation. L&G have brought out new figures to
show the extra cost of waiting to save for retirement, to achieve a
decent income.
L&G calculate that a 25 year old starting saving today needs
to have £205 a month going into their pension pot to be on
track for an income of £20,000 a year retiring at 60. 20% of
that monthly payment can come from tax relief. If that person puts
off saving for ten years, the cost more than doubles to £423
a month.
The situation could be the same, or worse, for someone who stops
paying into an existing personal pension. That is because, although
the money invested should continue to grow, the cost of keeping a
personal pension contract can increase significantly once you stop
paying in, which eats into your pot over time.
Legal & General acknowledged that the costs of basics such
as food (up 9.5% over the last 12 months), petrol and utility bills
have all been on the increase. However, people need to be aware of
the impact of putting something long-term like pensions on the back
burner.
Adrian Boulding, Wealth Policy Director said: "if people begin
to save even a relatively modest amount they can look forward to a
much more comfortable retirement. Funding your pensions can be
expensive as you may live a long time after you retire. By starting
your pension early you can reduce the risk of having to pay larger
sums in later years, just to retain a reasonable quality of
life."
