Surrey, UK (PRWEB) August 16, 2008 -- New figures from Legal & General (www.legalandgeneral.com) show that to achieve a pension income at age 60 of £20,000 a year starting today at age 25, requires monthly premiums of £205. However, delaying paying into a pension until age 35 means that monthly payments have to more than double to £423. Adding up the contributions payable over the working lifetime reveals the full cost to have risen by £40,000 as a result of this delay.
Legal & General is therefore urging people to look at investing in a pension as soon as possible to avoid an expensive cost of delay.
Adrian Boulding, Wealth Policy Director (pictured), Legal & General said: "When you are 25 or 30, retirement seems like a long time away but if people begin to save even a relatively modest amount they can look forward to a much more comfortable retirement. Funding your pensions can be expensive as you may live a long time after you retire. By starting your pension early you can reduce the risk of having to pay larger sums in later years, just to retain a reasonable quality of life. "
"During the past 12 months the cost of basics such as food, petrol and utility bills has dramatically increased. But with household budgets feeling squeezed, there is a danger that pension contributions might be delayed or suspended as people focus on the short term rather than the long term to ease the cost of everyday living. However, delaying your pension contributions can be very expensive."
Continues Adrian " I can't stress highly enough that the early contributions are the most valuable ones, as they enjoy the longest period of investment growth."
The two examples below show the cost of delay to a 25 year old and a 30 year old.
A pension plan to produce an annual retirement income of £20,000 - the cost of delay for a 25 year old*
Gross monthly level contribution to a money purchase pension plan required for a male aged 25, retiring at age 60.
A pension plan to produce an annual retirement income of £20,000 - the cost of delay for a 30 year old*
Gross monthly level contribution to a money purchase pension plan required for a male aged 30, retiring at age 60.
*Based on a 7% per year investment return. Level annuity payable monthly in advance, single life only, guaranteed for five years, assuming an interest rate in retirement of 5% per year(based on current rates). Charges equivalent to 0.8% per year.
The figures do not take account of inflation, which will reduce what can be bought with an income of £20,000 per year.