Retirement countdown begins at 36 – but is it early enough?

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By our mid-30s we’ve typically passed major milestones that allow us to actively plan for retirement and many have one eye on life after work following more than a decade in the workforce

• Marriage, homeownership and salary milestones often met by mid-30s
• The proportion of people saving more than the minimum pension contribution jumps by more than 50% from 36
• Topping up pension contributions by 3% from the age of 36 could lead to £120,000 more at retirement
• People today are starting retirement planning 13 years earlier than current retirees did, but pensions changes mean they have much to do

Age 36 marks a turning point at which we start to look to the future and begin actively planning for our retirement according to new research¹ from Standard Life’s forthcoming Retirement Voice report. After more than a decade in the workforce and with major milestones often behind us, the research finds we have both the capacity and willingness to begin saving more actively at this point.

Before 36, just 23% of people pay more than the minimum auto-enrolment contributions of 8% of earnings into their pension. However, by 36 the research among 6,000 people found that this figure jumps more than 50% to 35%.

All grown up by 36?
There’s strong evidence to suggest that by our mid-thirties we’re more settled in life and official statistics show the average age for both marriage and home ownership today is 34². Our capacity to save is greater and Standard Life’s research found that the average age people said they felt more financially comfortable was 37³. It is also a time when people start to become more confident in their ability to make financial decisions with 63% of 36 year olds confident in their abilities compared to an average of 56% for younger groups.

Prospect of 30 more years of work a possible prompt for retirement planning

While nearly two fifths (39%) of over 30s felt positive about their career prospects, compared to just 18% who felt negative, 36 year olds today face another 32 years before they will be eligible for the state pension and this figure could rise further.

When asked how they felt about the prospect of another three decades of work, a fifth (20%) of those in their thirties said ‘depressed’, while 14% felt ‘tired’ and 11% ‘stressed’ and it’s possible the planning urge is also a response to a desire for greater financial freedom.

Sangita Chawla, Managing Director at Standard Life, part of Phoenix Group commented: “Our thirties is the decade that for many people things start to fall into place professionally and personally, and that you start to achieve those life milestones such as buying property, having a child or settling with a partner. Financially it’s also the time many of us start to feel a bit better off and it’s this combination of a motivation to save and the ability to do so that start to come together.”

Starting sooner than today’s retirees – but is it soon enough?

When it comes to retirement planning, people today are giving themselves a 13-year head start on current retirees, who began their planning aged 49 on average. This is a positive sign, particularly as the majority of today’s retirees express regrets about how they approached planning:

• 55% wish they’d thought about retirement finances at a younger age when they’d had more time to make changes
• 54% wish they’d saved more for their retirement
• 53% wish they’d started saving for retirement earlier

However, with the shift from defined benefit pensions which offer a guaranteed level of retirement income, to defined contribution which do not, the onus is firmly on younger workers to take responsibility for their retirement plans.

A 3% increase to employee contributions at 36 could add £120,000 to eventual pension pot

Increasing pension saving in your thirties could give your pension pot a healthy boost at retirement age. For example, someone that began working full-time with a salary of £25,000 per year and paid the current standard monthly auto-enrolment contributions (5% employee, 3% employer) from the age of 22, could amass a total retirement fund of £488,000 at the age of 68, not taking inflation into account*. However, topping up contributions by 3% from the age of 36 could give you £611,000 by the age of 68 – £123,000 more than if no tops up were made. If the 3% top up was made from the age of 49, this could result in £559,000 at the age of 68.

Impact of topping up contributions at different stages in life – total retirement pot at 68*
Standard contributions of 5% employee and 3% employer, starting aged 22	Employee contributions increased to 8%, starting aged 36, with 3% employer contributions	Employee contributions increased to 8%, starting aged 49, with 3% employer contributions
£488,000	£611,000	£559,000
	+£123,000	+£71,000

*if beginning working with a salary of £25,000 per year and paying 3% employer, 5% employee monthly contributions into a workplace pension and assuming 5.0% investment growth and 3.5% salary growth per year. Figures are not reduced to take effect of inflation. Annual Management Charge of 1% assumed. The figures are an illustration and are not guaranteed. Earning limits not applied.

Sangita Chawla continues: “The next generation of retirees will be facing a very different situation to those currently retired, many of whom have benefitted from defined benefit pensions meaning they’ve not needed to take as much responsibility for their own retirement funds. With DB pensions fading out, future retirees must take matters into their own hands. For those doing so there are a number of headwinds in the form of high housing costs, a cost of living crisis with added challenges like student tuition fees to contend with and it’s likely many will face trade offs when it comes to meeting today’s costs versus planning for retirement. It’s encouraging that the government has laid the groundwork for auto-enrolment to be extended to eighteen year olds as the biggest advantage younger people have on their side is time. For those in a position to do so, proactively topping up their contributions or making one off payments could prove to be a valuable gift to their future selves.”

ENDS

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Notes to Editors

¹ Boxclever conducted research among 6,350 UK adults. Fieldwork was conducted 26th July – 9th August 2023. Data was weighted post-fieldwork to ensure the data remained nationally representative on key demographics.

² ONS English Housing Survey 21-22 and ONS 2020 Marriages in England and Wales

³ Opinium research among 2,000 UK adults, September 2023

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