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31 Dec 2012

Young People´s Lack Of Interest In Saving For Pensions Threatens Existence Of Private Pensions

Private pensions may no longer exist in 40 years as young people are not interested in saving money for retirement, pension expert Michael Johnson told The Daily Telegraph last Wednesday.

According to Johnson, who is a research fellow at the think tank Centre for Policy Studies, being able to access their savings at any time is more important to young people than putting money into a pension which they can not touch until they retire.

For young people, putting money aside that they can only use in 30 or 40 years time does not offer many benefits in view of the uncertainty surrounding the return on these funds which is constantly being affected by increasing pension costs, Johnson said.

In addition, saving into a pension if one is 25 years old and can only make use of these funds in 45 years does not seem to make much sense for young people who are struggling with elevated house prices and college debt, he added.

As a result of young people´s reluctance to save into a pension, demand for pension products will decline gradually, according to Johnson, which will lead to an earlier end to the tax relief and, in turn, to a faster decline in demand. Thus he predicts that pensions will no longer exist by 2050.

Johnson also said that young people should put money into a workplace pension only if their employer offered big contributions and if they were 40% taxpayers, which means the tax relief on their savings would be higher.

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