A pension top-up of just £21 a month from the age of 22 could boost retirement pots by up to £26,000, new analysis from Standard Life has revealed.
Among those who have graduated from university in the last five years, 89% said that pension planning is important to them. However, shorter-term financial matters are more likely to be a priority at this stage, with general saving and investing, as well as day-to-day living expenses and saving for a house coming ahead of saving for retirement.
Standard Life said that while retirement saving may not be a top concern for graduates at the moment, those who are able to save a bit more into their pension once they start working could find themselves better off in future.
Its analysis shows that someone who began working on a salary of £25,000 per year, paying the minimum monthly auto-enrolment contributions from the age of 22, could have a total retirement fund of £210,000 by the age of 68, adjusted for inflation. However, increasing monthly contributions by just 1%, from £104 to £125 a month, from the age of 22 could see them accumulate £236,000 by the age of 68; an increase of £26,000.
Graduates that can afford to increase contributions even further to 8% a month, or £167, from the age of 22 could see this figure increase by £79,000 to £289,000.
Dean Butler, managing director for retail direct at Standard Life, said: “Graduates have a lot to juggle as they take their first steps into working life, from rent and bills to saving for a home. Therefore, while most recent university leavers are conscious of the importance of pension planning, it’s understandable that other financial concerns take priority and that saving for retirement is not top of mind when only just starting on the career ladder.
“However, for those able to do so, sacrificing a round of drinks, a gym class or a takeaway each month and putting those savings into a pension can make a notable difference over time. Topping up pension contributions from the start of a career could be hugely valuable, as your pension will benefit from tax relief, and from the power of long-term investment growth.”
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