Pensions - Articles - Student debt will have huge consequences on pension savings

 “Increasing levels of student debt will have massive consequences on pension savings for generations to come. Recent low wage growth combined with high rents and the requirement for a big deposit to get on the housing ladder could prevent young people making a start on their long-term savings.

 “Study after study shows that starting to save in your 20s pays massive dividends, as it allows your savings to compound over time.

 Saving a little into a pension is a start, but the reality is as debt-burdened graduates enter the workforce, many prioritise paying off the debt over saving for retirement. In the early years of their career graduates’ earnings come under enormous pressure from a variety of living costs but focusing solely on student debts at the expense of saving could prove to be a mistake in the long run. Pensions come with valuable employer contributions and tax relief so it isn’t just the personal saving contribution that people are giving up.

 “The current government review of auto-enrolment needs to consider the daily financial pressures this group faces against the need to save for retirement. Introducing more flexibilities in minimum contributions for times of financial difficulty, while incentivising employers to take a much more active role in promoting the value of saving and workplace advice, could be a step in the right direction.”