Economic climate prompting younger Brits to think about their long-term finances

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• 16% have greater consideration for how much money they need to live on due to high inflation, 11% due to rising interest rates
• 21% of younger Brits are thinking more about their financial futures because of high inflation, 15% because of interest rates
• Standard Life analysis highlights benefits of investing from an early age - starting pension contributions aged 22 could mean £114,000 more in retirement than starting aged 27

With slowly improving economic conditions forecast for 2024, following two years of high inflation alongside rapidly rising interest rates, it’s personal finance issues that are high on the agenda of many Brits. New research1 from Standard Life’s Retirement Voice report reveals that more people – particularly younger adults – are now beginning to think about their financial future and are turning their attention to their retirement finances.

More than one in seven (16%) said that rising inflation has prompted them to take more of an interest in how much money they’ll need to live on in retirement, while 11% said increasing interest rates have encouraged them to think about this too.

Younger generations in particular have now started thinking about their future finances, 21% because of inflation and 15% because of interest rates. This is promising, as Standard Life analysis shows that engaging with your financial future from an early age and giving yourself a head start with pension contributions could pay off later.

The analysis finds that those who begin working on a salary of £25,000 per year and pay the standard monthly auto-enrolment contributions (3% employee, 5% employer) from the age of 22, could have a total retirement fund of £434,000 by the age of 66, not adjusted for inflation. However, waiting just five years to age 27 to start contributing could result in a total pot of £320,000 – £114,000 less. Waiting even longer could have an even bigger impact on a retirement pot:

*if beginning working with a salary of £25,000 per year and paying 5% employee and 3% employee monthly contributions into a workplace pension at the age of 22 and assuming 3.5% salary growth per year, a 1% annual investment cost and 5% investment growth per year. No Earnings Limits.

Dean Butler, Managing Director for Retail Direct at Standard Life, part of Phoenix Group commented: “The economic backdrop of the last couple of years has affected most people’s finances with the cost of essentials like food and household bills and higher mortgage, rent or debt repayment costs due to rising interest rates still outpacing income rises for many. This has acted as a stark warning for some Brits who’ve been forced to focus on their finances, both short and long-term.

“Younger generations starting to engage more with their financial futures is perhaps one positive to take from a tough situation, as this could help improve their long-term financial outcomes significantly. Though it can feel daunting to think about the far future, the sooner people start planning for retirement and contributing towards their pension the greater their retirement outcomes can be. Open finance tools, which give people the ability to see all their finances in one place, can help those looking at how to balance short and long-term financial priorities.”

ENDS

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