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Daily Mail
5 days ago
- Business
- Daily Mail
A pension at 18 is a pipe dream - but even £50 could give younger workers a six-figure pot, says HELEN CRANE
When did you first pay in to a pension? If you were born in the 1990s or later, there is a fair chance it was when you were 22. That is because of the launch of pension auto enrolment. Ever since October 2012, a 22-year-old starting a new job and earning above £10,000 could join their work pension by simply… doing nothing. Prior to that, doing nothing would have seen them excluded. In this famous example of nudge theory in action, the Government was taking blatant advantage of people's distaste for money admin and tendency to take the easy option, and it worked. It was nothing short of a pension saving revolution. A huge 88 per cent of workers who can save into a work pension do, according to Department for Work & Pensions figures from 2023. That is up from just 55 per cent in 2012. But now, we're told it didn't go far enough. Retirement fund: Young people have been told to start saving for a pension at 18 - but it will be hard to get motivated amid reports they might not retire until 74 This week, young people found out they should supposedly be saving for their retirement even earlier, at the tender age of 18. That's according to the boss of pension firm Legal & General Antonio Simoes – who would of course benefit greatly from people stuffing cash into their pensions for longer. It won't come as a welcome suggestion to young people for several reasons. Not least, that it is easy to suggest that you put more of your hard-earned pay packet towards retirement savings when you earned £10.6million last year like Simoes. It is also hard to feel motivated to save for retirement when, as a report published by the Institute for Fiscal Studies suggests, you may be working until the age of 74. This is the age it warned the state pension may have to rise to. Furthermore, a lot of 18-year-olds are now at university racking up debt and in no position to be saving any money at all. But even if they wanted to save more, young workers are having their finances stretched in all directions. If they have been to university, a 21-year-old starting their first job will have an average debt of £53,000, according to the latest Student Loans Company figures. Their rent will cost an average of £665 per month for a room in a shared house, according to Spareroom. They might get pay rises as they move through their twenties, but by that time they are hit by another wave of more pressing financial demands. If they want to put down a deposit on a home, they need to find an average of £34,500, according to UK Finance. If they dare to think about starting a family they will need to save up for maternity leave, for most of which they will probably be paid the statutory £187.18 per week. What young people do have on their side is time. If you can put even £50 into a pension each month, this can have huge benefits After that, childcare costs an average of £238.95 per week in England, according to MoneyHelper. It is no wonder this group is the most likely to opt out of their work pension. Last year, research by Barnett Waddingham found 55 per cent of 18 to 24-year-olds had previously opted out of their pension, and over a third of 25 to 30-year-olds. But opting out entirely isn't the only option. Auto enrolment requires you to pay in 4 per cent of your salary, after which the Government will provide 1 per cent in tax relief and your employer will pay in 3 per cent. If they are generous, they might pay more. If you're struggling, you may be able to pay in less. While your employer's contributions might reduce or stop, you'll still get the benefit of compounding gains on investments. What young people do have on their side is time. If you can put even £50 into a pension each month, this can have huge benefits. Even if you never increased your contribution, paying in £50 per month from the age of 22 to 67 would deliver a £172,000 pension pot. That is based on an annual return on your pension investments of 6 per cent. This is also helped by Government tax relief on pension contributions, which would instantly turn your £50 into £62.50. If you can pay in £100 a month instead, this would give you a pension pot of £276,000 after 45 years. And if you managed to boost that later, for example when you get a pay rise, your pot would grow even more. This week, the Government launched a Pensions Commission to address the poor pension prospects of those not included in auto-enrolment – including low earners and the self-employed. The Government also lamented the fact that, while auto enrolment boosted participation in workplace pensions, many workers 'only' put aside the minimum contribution level. That's a tougher ask than it sounds for many – but if it is going to change, spelling out how even a small pension contribution can turn into £172,000 might be a good place to start. And if you are older and feeling generous, consider paying £50 a month into a pension for your children or grandchildren. One day, they'll be very grateful.
Daily Mail
19-07-2025
- Business
- Daily Mail
Start saving for your pension at 18, says Legal & General boss
The boss of Britain's biggest money manager has called for the age at which workers are automatically included in company pensions schemes to be cut to 18 to help them save more for retirement. Antonio Simoes, chief executive of Legal & General, said lowering the threshold from 22 would also boost the economy now and lessen dependency on state benefits in the future. Hundreds of thousands of young people in their first jobs, apprenticeships or in temporary or holiday work would also develop the savings habit early. The boss of the £14.4 billion FTSE 100 giant said: 'The challenge of pensions adequacy – making sure all of us have enough to live on in later life – is urgent and pressing. 'Adequacy depends on three things: how much people are putting in, what returns they get and, crucially, when they start. 'The best financial gift we can give young people is time. A pension opened at 18 may not seem much now, but in 30 or 40 years it could mean everything. So let's stop wasting time. Let's start saving it. 'Currently, auto-enrolment schemes, which cover millions of workers at companies without their own pension funds, are only open to those aged 22 and over.' He pointed to countries such as Australia and Canada where the auto-enrolment age is already 18, showing that it was possible. The controversial call from Simoes, who heads a business that manages £1.2 trillion of pensions and other savings, comes ahead of tomorrow's launch of the long-delayed Government review of Britain's grossly inadequate level of retirement provision. The study, to be led by Pensions Minister Torsten Bell, will investigate the significant inequalities between retirees with generous company pensions and those who are reliant on the basic state pension, having accumulated little or no other savings. As well as trying to find solutions to retirement poverty, the review may also allow people to dip into their pension pots at any age if they are short of cash. Also on the agenda will be the thorny issue of raising auto-enrolment pension contributions. These currently stand at 8 per cent and are split between the employer, who pays in 3 per cent of a member of staff's earnings, and the employee, who pays in 5 per cent of their earnings. There is pressure to raise the total contribution to 12 per cent. But such a measure is likely to be delayed against the background of the furore over the increase in employers' National Insurance contributions in April, which Chancellor Rachel Reeves announced in her Autumn Budget. The Federation of Small Businesses has already voiced its opposition to a rise in auto-enrolment contributions. Simoes' plan to extend auto-enrolment to 18-year-olds is also likely to meet resistance, as this would impose even more of a burden on businesses. But the L&G boss said the benefits would be likely to outweigh the costs. 'It would be a win-win. Those at retirement would be in a stronger financial position, less reliant on the state,' he said. 'And when more people save, more capital is available for the UK economy, supporting jobs, infrastructure, and national resilience. 'Bigger pension pots could be channelled into productive investment, helping to fund growth and regeneration. And retirees would have more to spend. 'This matters, given that consumer spending drives 63 per cent of UK gross domestic product and retirees already account for a quarter of that total.' The L&G boss's intervention comes after Labour announced last week that the voting age is to be cut to 16 from 18 by the time of the next general election, fuelling an ongoing debate about at what age people should assume responsibility for decisions, including over their finances in later life. ...but Mayor's plan 'could leave majority worse off' A plan to grow workplace pension pots faster by taking more risk has been slammed as 'truly bizarre' by a leading consumer campaigner this weekend, in a move that could leave retirees 'worse off'. Tesco, BT, and NatWest are among more than 20 firms that have signed up to an 'employer pension pledge', which prioritises maximising returns for savers over charging them low fees. The move is led by City of London Mayor Alastair King, who says hiring more expensive fund managers to invest in riskier 'alternative' assets – such as private equity and infrastructure – will deliver better long-term returns for pension savers than only investing in the stock market. Boosting the size of pension pots matters because most of the population is not saving enough for even a modest retirement. But experts say King's plan is flawed because high fees devour investment returns over time. 'When it comes to investing, the only certainty is cost,' said James Daley, head of the Fairer Finance campaign group. 'The assertion is that pension funds which are keeping costs low are delivering worse returns, but I've not seen any evidence to support that.' Most 'active' pension fund managers, who pick their own investments rather than track the stock market, underperform in the long run, he added, saying: 'The new employers' pledge is truly bizarre. I am surprised so many serious firms have put their names to it. If this pledge results in more firms investing more of their employees' money in more expensive funds, the stats tell us the majority will be worse off.' Critics say the pledge also fails to tackle an even bigger problem – the lack of cash going into workplace pension schemes, especially from employers. Under auto-enrolment, 2.4 million firms pay a minimum of 3 per cent of a worker's salary into their occupational pensions, which are then invested on their behalf without any guarantee of a set income when they retire. More than 11 million private sector workers chip in at least 5 per cent of their salary to save for their golden years in this way. These minimums could rise in a long-delayed Government review of retirement savings, which is due to be announced by Pensions Minister Torsten Bell tomorrow. Fees are capped at 0.75 per cent a year of a fund's value for default funds, driving some schemes to opt for cheaper, 'passive' forms of stock market investing. 'The knock-on impact of this heavy focus on fees has been shrinking allocations to UK equities, starving UK companies of capital,' said Jason Hollands of wealth manager Evelyn Partners. The Government has no plans to lift the fees cap, but hopes to keep costs down by encouraging more pension funds to merge into larger schemes to invest in private companies, Hollands said. King, who founded his own fund management firm, also called for the cash Isa allowance to be cut from £20,000 a year to boost investment in UK firms. That idea is on hold after a backlash by building societies, which rely on savers' cash deposits to fund home loans and other lending.
Yahoo
10-07-2025
- Business
- Yahoo
Blackstone and L&G form up to $20 billion private credit partnership, Bloomberg News reports
(Reuters) -Blackstone has entered into a private credit partnership with Legal & General that the two firms plan to expand to up to $20 billion over the next five years, Bloomberg News reported on Thursday, citing a Blackstone spokesperson. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Bloomberg
10-07-2025
- Business
- Bloomberg
Blackstone, L&G Strike Up to $20 Billion Private Credit Tie-Up
Blackstone Inc. has signed a private credit partnership with Legal & General Group Plc that the two firms aim to grow to up to $20 billion over the next five years, according to a Blackstone spokesperson. The tie-up will see the New York-based alternative fund giant originate investment-grade private credit deals for the UK insurer's annuities business, while also spawning public-private hybrid credit solutions alongside L&G's asset management unit, according to a joint statement seen by Bloomberg News.
Yahoo
06-07-2025
- Business
- Yahoo
See how much an investor needs in a SIPP to earn passive income of £777 a month
My primary goal when investing is to generate passive income from dividend stocks, but I'm not taking a penny of it today. Every coin goes straight back into my Self-Invested Personal Pension (SIPP) to build wealth for my future. When I finally retire, I will use that to generate a regular second income, on top of my State Pension. Ideally, without having to sell shares or draw down the pot. To target a nice round figure like £777 a month, which adds up to a meaty £9,324 a year, I'd need to crunch some numbers. The 4% rule is a common starting point. It suggests that withdrawing that percentage of pension each year should avoid depleting the pot. Based on that, I'd need a pot of £233,100 to generate my target income. That's a decent sum, but not out of reach. I could generate a similar income from a smaller pot, if I focus on high-yielding FTSE 100 stocks like Legal & General Group (LSE: LGEN). Its shares are showing signs of life after years in the doldrums, climbing 12% in the last year. But the yield's the main attraction here. Today, it's 8% on a trailing basis. Over the last year, my total return's close to 20%. I'm happy with that. There's still a long way to go. Latest results, published on 6 March, showed core operating profits up a solid 6% to £1.62bn, while the board announced plans to return more than £5bn to shareholders over three years. That includes a £500m share buyback for 2025, following a £200m programme last year. Legal & General also increased its final dividend to 15.36p, taking the full-year payout to 21.36p, up 5%. While increases are expected to slow to 2% a year between 2025 and 2027, that feels reasonable given that generous yield. It's been a bumpy few years though. Earnings per share have fallen 62%, 43% and 61% over the last three years. That's lifted the price-to-earnings ratio to an eye-watering 88. That doesn't look cheap, but investors could still consider buying the stock today. That's because the dividend appears well-supported and the income can be reinvested while we wait for sentiment and the share price to pick up. No stock is risk-free. Legal & General remains sensitive to market swings, its asset management division has faced margin pressure, and its fortunes are closely tied to UK economic sentiment. Those are things to keep in mind. Back to the passive income goal. If I could build a portfolio yielding 5.5% on average, I'd only need around £169,527 in my SIPP to generate that £9,324 annual income. That's a lot less than the £233,100 required using the 4% rule. Investing's a long game. Getting to that £169,527 target would take time, but with consistency it's achievable. Let's say an investor was starting from scratch, with 30 years before retirement. Investing £150 a month would give them £182,000 over that timescale. This assumes average annual growth of 7% a year, roughly the long-term FTSE 100 average. There will be ups and downs along the way. Dividends can be cut, and share prices do fall. But with a well-diversified income portfolio, I think this is a realistic goal. The post See how much an investor needs in a SIPP to earn passive income of £777 a month appeared first on The Motley Fool UK. More reading 5 Stocks For Trying To Build Wealth After 50 One Top Growth Stock from the Motley Fool Harvey Jones has positions in Legal & General Group Plc. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors. Motley Fool UK 2025 Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
