Young people are at risk of retiring with a shortfall of £26,000 a year if they continue to save at their current rate, new research finds.
Workers aged 22 to 32 are expected to have an annual income of around £52,699 when they come to retire, according to pension provider Legal & General.
This may sound like a healthy income today, but by 2060 it will be the equivalent of £15,978 when accounting for inflation.
This will leave them £26,350 a year short of the income they would need to achieve a comfortable retirement.
These workers are forecast to have approximately £800,899 in their retirement pot when they reach state pension age, equivalent to around £242,822 today.
Shortfall: Workers aged 22 to 32 are expected to have an annual income of around £52,699 when they come to retire which would leave them £26,350 a year short in retirement
Workers of this generation are the first to fully benefit from auto-enrolment, where employees are automatically opted into a workplace defined contribution pension plan.
The scheme has been a success, but just 8 per cent of employees’ salaries must be saved towards their pension each year.
This minimum contribution — 3 per cent for employers and 5 per cent for workers — needs to be increased to ensure that millions don’t fall into poverty, Legal & General warns.
Small increases in the amount you put aside can have a dramatic impact on your pension size.
Contributing an extra £30 a month from the age of 27 could boost a retirement nest egg by up to £100,000.
Katharine Photiou, of Legal & General, says: ‘When incomes are stretched, it can be hard to put more aside but small amounts now could result in a better quality of life in retirement.’
