The no-nest-egg generation


The government must go back to the drawing board and design simple, affordable and secure savings solutions for young people if it expects to restore public confidence and sort out the UK's growing pensions crisis.

That’s the message from new research carried out by the National Consumer Council (NCC) exploring the attitudes of under 35 year-olds to saving for retirement.

While young adults are aware of the looming pensions, the NCC found that only one in three people under 30 are putting aside money for old age.

While a shortage of cash is one reason why savings rates are so low, the lack of confidence in the pensions industry and the absence of affordable, trusted financial advice to aid the understanding of the complexities of pensions means that many young people doubt whether their saving will pay off in the long term.

Moreover, trust in government on pensions is so low that any moves to force individuals to save for retirement would be unpopular.

As a result, a "no-nest-egg generation" is emerging, warned Deirdre Hutton, NCC chairman.

"Thanks to the recent decline in good quality occupational pension schemes, low returns for savers, and the dwindling purchasing power of the state pension, government policy requires young adults to start saving for retirement earlier than their parents," she said. "But the reality is that this is not happening."

"Lack of trust in the pension providers – government, employers and the pensions industry - shines through as one of the reasons for their reluctance to save more," she continued. "But just as significant among those we spoke to is a lack of spare cash to save."

"Many young adults are struggling to pay for their day-to-day living expenses, while trying to keep up repayments on loans and credit cards. For those on the property ladder, the responsibility of a mortgage is often perceived as a better investment towards their future. Those with children have other financial priorities on their hands. Pensions are seen as a burden too many."

The NCC called on government to tackle the growth in personal debt before expecting people to save in pensions. New savings mechanisms are also needed to make pensions a reality for young people. A scheme similar to the Child Trust Fund, offering a savings voucher to everyone to kick-start pension saving is one suggestion from the interviewees that the NCC wants explored.

The NCC's findings echo those of a report published earlier this month by the Association of British Insurers that found more than a third of the working population – some eight million people – are not saving enough for their retirement while and eight out of ten of these are not saving at all.

But the answer to the widespread bewilderment and confusion around pensions is clear, according to Deirdre Hutton.

"Above all", she says, "a simpler and more stable state pension structure is vital if young people’s confidence in pensions is to be restored, allowing them to make informed saving decisions."