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Saving from age 35 unrealistic

Advisers say a report recommending individuals put off saving into a pension until age 35 and then build up their contributions to 35 per cent of their salary by age 55 is “unrealistic”.

A discussion paper from the Cass Business School Pensions Institute, published on Monday, says in order to maximise retirement income, a person should not contribute to a pension scheme until they reach age 35.

The report says the contribution rate for a typical male worker should then be steadily increased to between 30 and 35 per cent by age 55.

It says: “To maximise their standard of living over their lifecycle, individuals should wait until they are several years into their career before starting to contribute to a pension plan. Workers are better off consuming their initial low incomes rather than saving them.”

Syndaxi Chartered Financial Planners managing director Robert Reid says: “It is unrealistic to expect people to sacrifice so much of their salary when they are 55 because other commitments, such as paying for a child to go to university, will inevitably take precedent.”

Informed Choice managing director Martin Bamford says: “It is true that generally people would be better off paying back debt when they are younger and saving for retirement in their mid-30s but I do not think many would be willing to contribute a third of their salary to their pension.”


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  1. Whoever came up with the idea that anyone (other than well-off company directors who may be in a position to juggle their income between salary, dividends and pension contributions) would ever, at any age, be willing or able to lock away 35% of their earnings into a pension plan must be totally divorced from reality.

    More and more people, even those who can afford to do so, are becoming totally turned off pension saving and the government’s doing nothing to reverse that trend. In the run-up to the election, the Conservatives promised to put right as much as possible of the damage inflicted by its predecessors on the pensions system over the past 25 years but, in practice, it’s done exactly the opposite.

    It’s tried to claim credit for abolishing compulsory annuitisation by no later than age 75, though Labour had already done exactly this as of 6.4.2006. Not that it was of much practical value anyway, because all the alternatives are still shackled to GAD Rates and the death tax charge on unspent funds is 55%, possibly with what’s left subject to IHT as well.

    The LTA has been lowered to £1.5m, the minimum contributions threshold has been lowered to £50K p.a. and the rules in all sorts of other areas have been made more complicated and offputting. Pensions was never a simple subject (as it surely needs to be) but now it’s a horrendous quagmire.

    Instead of scrapping the tax on dividend income, reinstating life cover and Contributions Insurance and addressing the annuity (rate) trap, what have we got instead? NEST, designed by the government, already costing a fortune, to be administered from India (with no other contenders if TATA messes up) and the investments managed by a US firm of which most people in the UK have never heard. Most employers can’t afford it and most employees don’t want it.

    You could hardly make it up.

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