The peak age for retirement planning becoming an advice priority is 55, a new study by St James’s Place (SJP) has revealed.
The study, which surveyed just under 12,000 individuals, found that the top three advice priorities across the country were retirement planning advice, general investment and savings advice, and better budgeting.
However, there is a large generational divide as the cost of living and budgeting see younger generations push retirement planning down the line.
Only one in ten (12%) Gen Z and two in five Millennials name it as an advice priority in the next six months.
Against a changing retirement landscape, SJP highlights the importance of starting retirement planning as early as possible.
The nation’s top advice priorities
The fifth chapter of SJP’s Real Life Advice Report, launching today, looks at where the nation is likely to look for financial advice in the future and their advice priorities for the next six months.
The study found that 1 in 5 people (19%) would find retirement planning advice the most beneficial in the next six months, ahead of general investment and savings advice (17%) and budgeting (14%). Other priorities include:
- Wills planning – 13%
- Putting an overall financial plan in place – 11%
- Keeping my financial plan on track – 11%
- Getting a better mortgage deal – 10%
- Inheritance & estate planning – 10%
While retirement planning is the top advice priority overall, it most often becomes a major focus only later in life, leaving less time to improve retirement outcomes.
Almost a third (30%) of Gen X (44–59-year-olds) name retirement planning as their advice priority for the next six months; however, it falls much further down the rankings for Millennials (28-43 year-olds) and Gen Z (18-27 year-olds).
Millennials rank better budgeting as their top advice priority (22%), with general advice on investment and savings (21%) in second and retirement planning in third place (18%) on par with the demand for advice on mortgages.
For Gen Z, advice on how to budget better is again the priority over the next six months for one in four (26%).
Retirement planning sits in fifth place at 12% behind general investment and savings advice (18%), putting an overall plan in place (16%), and advice on managing debt (15%).
SJP’s analysis demonstrates the difference that retirement planning earlier in life can make to retirement outcomes.
It finds that if a 30-year-old made a gross investment of £5,000 each year into a pension scheme, they would have a projected fund of £268,000 available at the age of 60.
However, just a five-year delay would result in a £67,000 reduction to that retirement fund, and a 15-year delay, starting contributions at age 45, would reduce it by £169,000:
| Starting age | Fund value aged 60 if making annual £5,000 investment | Reduction in fund | % reduction in fund | Increase in annual contribution needed to reach £460,000 by 60 years old |
| 30 | £268,000 | – | – | – |
| 35 | £201,000 | -£67,000 | 25% | £1,656 |
| 40 | £146,000 | -£122,000 | 46% | £4,200 |
| 45 | £99,000 | -£169,000 | 63% | £8,508 |
Calculations assume an average annual investment growth before charges of 4.60% each year and investment charges of 1.96% each year. Contributions are invested on the same day each year in a pension and are shown before charges are taken into account.
SJP divisional director of retirement and holistic planning Claire Trott said: “While it is perhaps unsurprising that advice on budgeting better, investments and savings, and managing debt is more pressing at a younger age, now that individuals have more responsibility for their retirement finances, it’s more important than ever to start planning early.
“The more time you have to build up your savings pot, the more time it has to compound, resulting in a larger pot when you retire. If you leave it too late, it can be difficult to make up the deficit.”
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