With the pension contribution rate increasing to 5% from 2% in April 2018, new interesting research has emerged.
Aegon insurance company has published findings that show a 22 year old opting out of a workplace pension can potentially see a hit to his or her pension fund of £450,000 by the time they’re 68. The research makes an assumption on minimum contributions and growth, but nonetheless it still highlights the wonders of compound interest.
Pensions, like most finances are highly complex…
Aegon surveyed 700 people and found that over half were unaware of the changes to pension contributions coming down the line.
This has prompted fears that more people will opt out of the system, greatly harming their retirement.
Kate Smith, head of pensions at Aegon, said:
“Raising awareness of the benefits of pension saving is key to the success of an employee’s financial future and we want to encourage employers to get across the value of workplace saving.
“The decision to opt out could end up costing workers up to £450,000 over their working lifetime, an enormous sum of money that would effectively be thrown away – why would anyone give up on money they’re entitled to?”
Pensions, like most finances are highly complex and good and bad decisions about your fund make a big difference to your pot at the end.
Tom McPhail Tom of Hargreaves Lansdown, stated that employees should look to put 12% to 15% of their income into their pension pot to maintain a good standard of living.
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Source: Daily Mail
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