INTERNATIONAL – One in three young people are prioritising saving to buy a home over putting money into a pension, new research shows.
Some 19 per cent of 18 to 34-year-olds admit their desire to get a deposit together is deterring them from upping contributions into a pension scheme.
Meanwhile one in 10 blame student debt and nine per cent say they change jobs too frequently to do so.
But some are shunning home ownership, with 17 per cent believing it is not realistic and 11 per cent saying it is not a financial priority, according to the Prudential research.
It's unsurprising many young people put a goal they could achieve in the near term such as buying a home ahead of one that lies far ahead in the future like enjoying a comfortable retirement.
Many are also under financial pressure from student debt and rent.
But those who do save hard for retirement in their youth will eventually gain outsize benefits from doing so, due to the compounding effect which works most to people's advantage over longer periods.
The successful Government pension auto enrolment initiative means people who don't opt out will benefit from compounding, without needing to understand how it works.
What is compounding?
Compounding is what happens when interest and/or investment returns are added to your savings, after which you earn them on the larger combined sum.
As this process of adding returns is constantly repeated over the years, it eventually boosts your pot to what can seem massively improbable sums to you at the outset.
Read more here about how compounding makes savings grow exponentially, when given enough time.
Minimum auto enrolment deductions from workers' wages tripled in April from 0.8 per cent to 2.4 per cent, and are set to rise again to four per cent next spring.
It's unclear whether this increase has prompted a spike in opt outs, among young people or any other age group, but officials and pension industry insiders have not rung alarm bells so far.
Some five per cent of the young people surveyed by Prudential had opted out of saving into their workplace scheme because they couldn’t afford it.
The research also found:
- One in five 18 to 34-year-olds believe their parents will give them financial help to buy a property
- One in 10 are living with their parents to save more money towards buying a home - with men nearly twice as likely to do this as women
- Around 21 per cent say they have not saved anything into a pension yet
- Some 15 per cent say pension saving doesn't motivate them, and 12 per cent believe pensions are irrelevant to young people.
The findings were based on a survey of 1,178 adults, 258 of whom were in the 18-34 age group, carried out in June.
Kirsty Anderson, retirement income expert at Prudential, said: 'Juggling buying a house with saving for retirement is challenging and it is inevitable that something gets dropped which unfortunately appears to be retirement saving.
'Retirement can seem daunting for millennials and is of course a long way off when you are contending with student debts and high rents.
'However, it is crucial to start saving for your pension as early on as possible, putting away as much as you can each time. It s easier if you start doing this as soon as you start working so you get used to the money going straight into your pension pot.
'Many will at least be saving through the workplace, which is a good start, and contributions should be regularly reviewed to ensure a significant fund can be built up.'