Educate Children/Adults On The Massive Cost in Delaying Starting A Pension
Published / Last Updated on 12/04/2024
It is all well and good learning Pythagoras, Newton’s 3 Laws, Boyle’s Law, Archimedes’ Principle or πr2 (Pi R squared) at school but for most of us, we rarely use any of these in life. Part of the curriculum or even any work induction course should involve the importance of money, saving and pensions.
What we should be teaching our children in schools or younger workers is the real cost and impact in delaying starting a pension. Giving them this education and understanding and then putting it to good use will make their retirement and access to funds in their 50s so much better.
The following demonstrates the real costs of starting a pension at age 20 at £200pm net but then delaying in 5 year steps.
|
Age |
Pension Fund |
Projected Income pa |
Inflation Income Adjusted pa |
% Reduction in Fund |
% Reduction Inflation Adjusted |
|
20 |
£378,092.70 |
£18,904.64 |
£6,222.92 |
0.00% |
0.00% |
|
25 |
£295,983.58 |
£14,799.18 |
£5,511.67 |
21.72% |
11.43% |
|
30 |
£228,758.31 |
£11,437.92 |
£4,819.61 |
39.50% |
22.55% |
|
35 |
£173,718.92 |
£8,685.95 |
£4,140.96 |
54.05% |
33.46% |
|
40 |
£128,656.47 |
£6,432.82 |
£3,469.80 |
65.97% |
44.24% |
|
45 |
£91,762.46 |
£4,588.12 |
£2,800.00 |
75.73% |
55.01% |
|
50 |
£61,556.20 |
£3,077.81 |
£2,125.12 |
83.72% |
65.85% |
|
Assumptions: Basic rate rax relief of 20.00% added to pension contributions and applied at source. FCA pensions mid rate growth of 5.00 % pa less annual management charge of 1.00 % pa, both applied/deducted monthly. Annuity rate of 5.00 %. Inflation (CPI) at 2.50 % pa. The value of funds, rates and investment returns can fall as well as rise and are not guaranteed so you could get back less than you invest. Taxation, tax relief rates and law are subject to change. |
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By not saving from age 20 and delaying starting a pension until age 30 results in a 39.50% reduction in funds, by delaying until age 40 means a 65.97% reduction in funds and by delaying until age 50 means a massive 83.72% reduction in retirement funds. In inflation adjusted, real terms it is still a massive 65.85%, that’s a 2/3rds cut in retirement income by delaying until 50.
Talk to your children, talk to your pupils, talk to your younger co-workers about the need to save as much as you can as soon as you can in pensions as it will dramatically improve your retirement assets and income.
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