Contact

News & Insights

Pensions may strengthen for the younger generation

New analysis by the Resolution Foundation has presented this optimistic view for the younger generation while simultaneously giving men in their 40s cause for concern.

Despite fears for the size of many millennials’ pension pots, the new research has found that they are likely to see their funds recover in time for their retirement. They may even find they have similar amounts to today’s pensioners. The assessment suggests that the generation currently in or entering retirement (baby boomers) will, on average, have a pension of 58 percent of their salary while millennials’ pensions will be about 56 percent.

However, the situation is likely to get worse before it gets better. In 2020, the average pension for a man could be around £310 a week, which takes into account private and state pensions. In the mid-2040s, the amount is likely to fall to approximately £285 (which is why the report is bad news for men currently in their 40s) before rising to around £300 per week by the end of the 2050s.

There is no such dip forecast for women, and it is predicted that they could be receiving an average £225 a week in 2020, reaching £235 in the mid-2030s, and then staying at that level.

“Millennials are on course to enjoy similar levels of retirement income to today’s pensioners, largely thanks to the success of auto-enrolment in getting them to save into a workplace pension from an early age,” said David Finch, the senior economic analyst at Resolution Foundation.

The report did have to make a few assumptions to reach these figures, and there are a few caveats attached. The Resolution Foundation said that while the size of pensions won’t be wildly different, millennials will probably not be able to accumulate the same housing wealth as baby boomers (Finch noted that housing is commonly the top concern for young savers, with retirement coming in second). The data has also assumed that people will stay in the Auto-Enrolment Scheme rather than opt out. The latter may become a much more attractive option in the future when the contribution required from employees will increase from one percent to three percent in 2018 and then to five percent in 2019.

Some investment experts also believe that, in a time of ultra-low interest rates, the report’s prediction that auto enrolment pensions will grow at a rate of 5.6 percent a year is too high.

In conclusion, the report stated, “Our analysis of current and future retirement income adequacy shows that neither pessimism nor complacency is warranted”.

Of course, if you’re at all concerned by the information in this new report, contacting a financial adviser for professional pension advice is always useful. You may have children who you wish to save for so you can help them out financially in later life, helping them get through university or getting onto the housing. We can talk you through all your options regarding this.

Alternatively, you may be enjoying your retirement already, in either the UK or a dream destination overseas. If that is the case, then financial advice may also help you if you’re unsure about how best to manage your retirement funds. For example, receiving pension transfer advice could lead you to discovering the many benefits of moving your pension into a Qualifying Recognised Overseas Pension Scheme (QROPS) which offers reduced tax liability or a SIPP which gives you greater control over your pot.

Speak to us today Blacktower fully discuss your options.

This communication is for informational purposes only and is not intended to constitute, and should not be construed as, investment advice, investment recommendations or investment research. You should seek advice from a professional adviser before embarking on any financial planning activity. Whilst every effort has been made to ensure the information contained in this communication is correct, we are not responsible for any errors or omissions.

Other News

UK Pensions – Act Now!

CoinsHSBC and The Local Government Pension Scheme are the latest Defined Benefit Pension Schemes to cause upset and worry to thousands of soon-to-be retirees.

Firstly, HSBC has come under fire for cutting the pension payouts of its former staff by up to £2,500 a year, affecting 50,000 members who joined the company between 1975 and 1996. This group had opted to pay less national insurance (NI) contributions whilst working by “contracting out” of the former state pension scheme. This meant that HSBC also paid less NI contributions. In exchange for paying a lower rate, the bank agreed to pay staff a guaranteed minimum pension when they came to retire. Payment records were however not properly maintained leading pensioners to be either overpaid or underpaid. Numerous firms, including HSBC, had used this arrangement and when the errors were discovered, some began to cut pension payouts to compensate for the overpayment.  

Read More

Residence or domicile? That is the question

One of the most frequently-asked questions asked by many of the 300,000 Expats living here in Spain is ‘am I resident or domicile?’ It is a good question, and one worth finding the answer to, as your residential status when living abroad affects the way in which you pay tax and how much you pay. 

Read More

Select your country

Please select your country of residence so we can provide you with the most relevant information: