Are your kids planning for retirement?

POSTED: 21st November 2016
IN: Personal Guides

With 40% of millennials (the generation born between the early 1980s and 2000), not having a retirement plan in place, and the state pension currently residing at just £155.65 per week, we ask: how can you help your children save enough for retirement?

Plants sprouting in plant potsFor young adults, retirement can often seem like a lifetime away. With the State Pension age expected to reach 68 between 2044 and 2046, individuals in their early 20s could be waiting until they’re at least 70 to retire. With this is mind, it’s not surprising that 40% of millennials don’t currently have a retirement plan in place, according to Franklin Templeton’s 2016 Retirement Income Strategies and Expectations (RISE) survey.


Alongside the distant idea of retirement that has kept young adults from saving for it, many simply can’t afford to. Nicknamed ‘Generation Rent’; with higher living expenses, large student debt and stationary wages, what this group do have left over from their income they want to enjoy now – not later. A proportion of young adults prioritise saving for a mortgage over their retirement – an outcome that they can begin to enjoy at an earlier age than their pension pot, while others choose short-term spending over saving for their retirement as they see it as decades away.


As parents, however, rather than feel frustrated at the outlook of your child’s retirement, there are several ways you can assist your children to ensure they’re set up for this far-away period in their life.


One thing to bear in mind is that perhaps it’s simply circumstances that are stopping your children from saving and planning for their income in retirement, rather than their attitude. Back in February, the FT boldly published an article ‘Why millennials are going on holiday instead of paying into their pension’, which sparked an intense online debate.


The FT received thousands of responses from young adults in regards to the article; many accused the publisher of being ‘out-of-touch’, while others explained the difficulty in saving for retirement alongside high rent prices and low wages. The backlash from this generation highlights that despite what is often perceived, many young adults genuinely care about their future, and would build up a pension pot if circumstances permitted them to.


How could you help your children save for their retirement?

As a parent, there are several ways you can help your children save enough for retirement. If you’re considering using your wealth to aid your child’s retirement, sitting down with a financial adviser will outline your options clearly; assisting with Inheritance Tax planning and gifting money. An alternative is also purchasing a buy-to-let property, which your children can take over after you die and use to generate an income. Many parents and grandparents are also setting up saving pots on behalf of their young loved ones, and putting small amounts of money aside regularly to build a future nest egg.

Quick tips to help your children prepare for their retirement

  • Sit down with them and explain the importance of a pension: you know, but do they?
  • Encourage your children to start investing in a pension plan as early as possible – it doesn’t matter how small an amount.
  • Ensure your children understand employer contributions/auto enrolment, and different pension types.

Handy key terms

  • Personal pension: A personal pension is managed for you, and allows you to make contributions while you’re working. Your employer can also make payments into your fund on your behalf.
  • Stakeholder pension: A stakeholder pension is similar to a personal pension, but has to meet certain criteria set out by the government, including a limit on how much the pension provider can charge for managing your fund.
  • Self-invested personal pensions (SIPP): A SIPP allows you to manage your own investments, giving you more flexibility. You can choose from a range of assets, including stocks, shares and insurance company funds.
  • State pension: The state pension is paid out when you reach the State Pension retirement age and have been paying National Insurance contributions for a specific period of time, currently 35 years.
  • Auto enrolment: A government initiative, auto enrolment makes it compulsory for employers to automatically enrol their members of staff into a pension scheme, and contribute to it. Employees should be enrolled into a workplace scheme by 1st February 2018.

Useful websites

Here are a few online guides you may want to share with your kids:

Money Advice Service
Citizens Advice
Pension Wise
The Pensions Regulator

Although it may be harder for young adults to save for a pension, this fierce, hungry generation aren’t giving up. With support and advice from their parents, auto enrolment and understanding pensions, they’ll have the means to start planning their retirement, and you never know, they might have a more comfortable retirement than you.

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