Young people need to start saving as soon as possible

Young people need to start saving money as soon as possible in order to ensure they are properly provided for in retirement and old age.

Robin Ellison, head of strategic development for pensions at Pinsent Masons, said that by starting to save early, not only will people have a better chance to build up enough money, but they will also feel the benefit of compound interest.

"It's really good if they can save money early on, because the effect of compound interest is unbelievable. So the sooner they start the better it is, but it's very understandable that they have other priorities," he conceded.

Brits now have to use their savings for immediate concerns such as student loans and building up a deposit for a house so it makes sense if retirement funding gets put on the back burner, despite its importance.

But he added that young people in the UK will probably be retiring later, at around 70 to 75, meaning that they have longer to save for their old age.

The comments follow research by the Pension Protection Fund which revealed in its latest figures that the UK private pension deficit has increased to a record size of £255.2 billion.

It also noted that businesses are being put under increasing pressure to fill in the funding gap, with the auto-enrolment coming into effect later this year.

Tony Attubato, head of dispute resolution at The Pensions Advisory Service, said last month that while opting out of an automatic workplace pension may benefit short-term finances, it could be very damaging in the long term.

He explained that the standard of living people enjoy in retirement is directly linked to how much money they save while they were working, adding that opting out also means that people will lose their employer's contribution.

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2012-01-16 13:04:56 © Moneyextra.com