How to switch your savings attitude

Anthony Devlin/PA

Do you have a pension? The answer is likely to be no if you're under 35, according to new research that finds 95% of workers in this age bracket are not saving for retirement.

A 'live for today' attitude and an ambition to get on the property ladder are pushing pensions to the back of our minds, but where does that leave us in retirement?

Figures from the study of 1,316 Brits by Nationwide suggest just 5% of workers aged between 18 and are putting cash aside for their old age.

With finances already strained for many households, the study found any spare cash is being saved for more immediate concerns, such as saving for a deposit to take their first steps onto the property ladder – a savings priority for 34% of people in this age bracket.

Richard Marriott, Nationwide's Head of Savings, said: "Encouraging young people to adopt a savings habit early on is vital. Just putting aside a small amount on a regular basis can make a huge difference."

So how can we shift our savings attitude to ensure we're not destitute in retirement?

Company pension
Whether you work full or part-time, if your company offers a pension scheme, it is generally a no-brainer to sign up. Contributions might feel unaffordable at first, but payments made automatically on payday each month help you to quickly learn to live without the extra cash.

If you don't join your company scheme, you are effectively turning down a benefit that you are entitled to, as your employer will often make a monthly contribution to your pension pot too. You also get tax relief on the money you pay into your pension because your employer takes the pension contributions from your pay before deducting tax, which means you pay less tax.

If you're confused by the scheme on offer from your company – don't let it scare you off. Contact the pension scheme administrator with any questions, or speak to the Pension Advisory Service for free advice.

State pension entitlement
With 95% of young adults not making personal pension provision, it looks like we'll all be depending heavily on the state pension come old age. But do you know how much you are entitled to?

It is possible to apply for a state pension forecast to see how much you may get based on your National Insurance contributions to date. It will give you estimates of how much basic and additional State Pension and, if appropriate, any Graduated Retirement Benefit you may get.

But bear in mind that it is based on your National Insurance record as it stands on the date the statement is prepared - it is not a forecast of how much State Pension you will get when you reach State Pension age

You can ask for this statement by telephone (0845 3000 168) or online – you'll need your National Insurance number and details of any time you have spent working outside the UK.

Make debts priority
In the Nationwide study, 16% of respondents said they are saving with the aim of paying off their debts. Saving while having debt is commonplace – we like to give ourselves even a small safety net – but it is actually a false economy.

Unless your debts are not growing – for example on a 0% credit card – it makes more sense to clear debts directly, than building a savings fund to pay off debts in a chunk. In the current climate, with savings rates so dismal yet rates on personal loans, credit cards and overdrafts potentially still high – chipping away at debts with as much as you can afford will get them cleared faster so you can switch your sole focus to saving as soon as possible.

Remember that making the minimum repayment on credit cards is not enough. These small payments can stretch the debt over many years, causing you to shell out considerably more in interest than the original amount borrowed.

Financial review
Getting on the property ladder is a major short to medium-term financial goal for many young adults, but it is crucial to consider longer term goals as well. Working out a monthly budget is key to discover the maximum you can afford to save, then the sum can be divided according to the priority of your goals.

Whether you employ an independent financial adviser or figure things out on your own – it is worth carrying out an annual review of your household finances to ensure you're on track to meet all your goals. These will change with life's events, such as getting married, having children or starting a business for example, so your strategy must be adapted at these times.
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