‘No one wants to work til 70’, a student’s view of pensions

A 20-year old intern with interactive investor explains what he thinks when he hears the word ‘pension’.

In this year’s Great British Retirement Survey, 53% of people aged 24 to 29 said they think the state pension won’t be there for them when they retire. We hear from Sam, a 20-year old intern with interactive investor, about what he thinks when he hears the word ‘pension’.

As a 20-year old with my entire adult life ahead of me, I’m not sure what to think about pensions.

Having seen my Nan struggle for years on her pension because she received only half of what she was promised, eventually forcing her to move, my first opinion was not very positive. However, learning more about pensions in the past few days as an intern at interactive investor than I ever knew before, I believe I now have a more balanced viewpoint. 

On the one hand, pensions are a great idea as they ensure you have some sort of savings for your retirement, especially with auto-enrolment getting you started as early as possible. The tax relief and employer top-ups are a major bonus; allowing you to gain a great rate of return by having your contributions matched, essentially for free. But the question is, will my generation get enough?

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Because my age group will not likely receive the same sort of workplace pensions as our predecessors, I think it would be foolish to rely solely on them. I think this view is very common among my peers, leading to more young people becoming interested in investing and other ways to save. A lack of faith in pensions has also made me work harder outside of work or studying to think of ways to make more money, so I can retire comfortably and preferably, earlier. Leading me to my next point…

A major issue with pensions, from a Generation Z point of view, is that the age of retirement is rising so quickly. Speaking to some friends to gauge their opinion on pensions, this seems to be the main thing that comes up: no one wants to work until 70. I think this is completely reasonable. How can you enjoy your retirement if you are too old to travel or spend the money you’ve saved all this time? It’s not an attractive prospect.

Here are some quotes from my friends:

“Don’t know enough about them to be honest”

“I have a pension, but I don’t know how much I put in or how they work”

“I hear they’re getting worse”

“Still a risk, I don’t trust it”

“I’d sooner do it myself.”

I think the last quote is an excellent point as the lack of trust (when it comes to pensions) could be somewhat alleviated if you do it yourself. This is made so much easier today than it was for my parents by platforms such as ii, etc. Having control over what you invest in would force more people to take notice of their finances, and when they know more about investing, they’ll be more confident and likely to invest.

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My general opinion is that if I want a house and to retire earlier than the point at which I need a Zimmer frame, I need to start saving NOW. I still believe the workplace pension is good idea, but because of the limited amounts we’ll receive and the age we’ll receive it at, I believe other options such as a self-invest personal pension (SIPP) or ISA are an excellent thing to do, especially if you start early so you can fully take advantage of compound returns. I currently only have an ISA, but after learning about SIPPs, I plan to start investing in one as well to gain the amazing government top-ups. However, I will mainly focus on the ISA because of the tax benefits and the ability to withdraw whenever I wish. 

In general, I believe everyone should have a pension, but have something on the side as well. I say this as you might be able to live off a pension, but perhaps not comfortably. By having another account like an ISA, you can be more confident about having an easy retirement. The way I look at it, you shouldn’t have to stress about money once you’ve finished work – you’ve already put in the hours.

For now, I’m undecided on how much I’ll contribute to my workplace pension, but I have decided that I’ll invest as much as possible in my ISA while I don’t have much responsibility, in order build up my savings.

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For something so crucial, I’m surprised more isn’t done to make younger people aware of the importance of long-term saving, especially with the difficulty our generation faces with housing prices. I believe simply showing young people how much they’re likely to live off when they retire would drastically change their thoughts when it comes to savings. I think we would see less designer t-shirts and more investments.

Becky O'Connor, head of pensions and savings at interactive investor, says: “Sam should keep the faith in pensions and put as much in as he can manage throughout his working life. No other long-term investment product comes with tax relief and also employer contributions, if you are employed. Both of these turbocharge your own contributions, transforming a few hundred pounds a month from you, potentially, into four-figure overall sums. While ISAs can be part of the mix, especially if you want to retire a bit earlier than when you gain access to your pension, workplace pensions remain pretty unique.”