A survey carried out last year by the Financial Conduct Authority (FCA) found that around 15 million Britons have no pension savings. This works out as 31% of UK adults, and means that a large proportion of them will ultimately rely upon the state pension when they come to retire.
Never too late
The survey also found that among people aged 50 or over, the most common reason for not having a pension is that they believe it is too late to do so. Around a third of respondents gave this as a reason for intending to rely on the state pension when they retire.
However, the fact is that it is never too late to start investing for retirement. Even an individual who is in their 50s or 60s can contribute to a pension in order to gain tax benefits, as well as the potential returns from the stock market. For example, over the last 20 years the FTSE 250 has risen 3.7 times in value. Investing for even a five or 10-year time period could therefore lead to a larger nest egg than many people realise, although clearly it also comes with significant risk.
Of course, starting at an early age makes life much easier when it comes to saving for retirement. The impact of compounding should not be overlooked, since it can have a major impact on the age at which a person is able to retire, as well as their income levels in retirement. For example, an individual investing £25 per week in the FTSE 250 from the age of 21 until retirement age could have a nest egg of around £800k if the index performs as it has done in the last two decades.
Furthermore, the ease with which individuals can plan for retirement has improved dramatically in recent years. Today, it is possible to open an ISA or personal pension online, with the fees for doing so being much lower than they have been in previous years. Additionally, the cost of tracker funds and many active funds is declining, which makes it even easier to generate high returns in the long run.
Picking the right stocks
Of course, it is possible to generate market-beating returns over a prolonged period of time. This could help an individual to retire earlier, or at least face less pressure on their finances when it comes to retirement. At the present time, the stock market is trading at relatively high levels, but there continue to be a number of shares which could offer long-term income and capital growth potential.
While investing in them or in a fund may not seem to be the biggest priority at the present time, the reality is that retirement generally comes quicker than many people realise. As a result, planning ahead and avoiding being among the 15 million Britons with no retirement savings could be a shrewd move - whatever age you are.
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