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Pensions Awareness Week

By Michael Monteith

Pensions are a long term investment that require careful financial planning. But for many millennials - even those entering well-paying careers - the reality is that saving even a modest amount is not realistically possible.

Michael Monteith, a 29-year-old junior doctor has recently cancelled his pension in order to afford more pressing, short-term needs. "I'd always hoped that by this age, I'd be out of debt and not relying on the bank of mum and dad. Unfortunately, that's not the case. I know it's not a wise financial decision for the future but at the moment, I just can't afford to do it," Michael explains. "The financial pressures are too heavy."

His situation is typical of a generation of young professionals who find themselves struggling to make ends meet. Recent research* carried out by Wesleyan, a financial mutual that specialises in working with professionals like doctors, dentists, teachers and lawyers, found that fewer than two in five (40%) under the age of 35 were currently saving into either a private or employer's pension. This falls to a quarter (26%) of those aged under 24.

And it's not because the distant prospect of retirement means they don't see saving as a high priority. More than half (53%) of those under 35, are already worried that they won't have enough to live on in retirement.

But with rising life expectancy rates causing the cost of retirement to soar, those at the start of their careers are being encouraged to make their money work harder, by saving earlier to ensure they have enough built up to pay for an adequate pension.

"Although our salary is good, it's not always enough to cover the cost of living and ongoing medical exam fees," Michael says. "On top of this, there's currently a lot of uncertainty for junior doctors. The ongoing debates around our contracts and the constant changes to the profession is making a lot of student doctors dubious about undertaking further training."

By not paying into his pension, Michael is also missing out on a 14.3 per cent employer contribution from the NHS. And, as Wesleyan financial consultant Jonathan Halberda who specialises in the medical profession explains, there is more to the NHS pension scheme than just a retirement income.

"The deductions for the NHS pension are more than just provision for retirement. It also provides access to death in service benefits, as well as building valuable ill health retirement benefits should incapacity be permanent. This is something I see a lot among junior doctors. However, there are options available to them while they go through their training, and help such as budget managers and guidance on how to cope with additional professional expenditure."

Vicki Wentworth, Wesleyan's Chief Customer and Strategy Officer, adds: "It's worrying to see that Michael, as a 29-year-old junior doctor, has had to stop paying into his pension to keep up with the rising costs of living and studying to progress in the profession he loves."

"Planning for your future is incredibly important, so our advice to today's young professionals is that setting aside even a modest amount each month early on in your career can deliver considerable rewards later on. As with any long-term investment or financial decision, we would encourage young professionals to speak to a financial adviser before they make any decisions."

* Research based on a survey of 2,624 respondents (including 203 Doctors, 201 Dentists, 101 Lawyers, 101 Teachers,) by Censuswide on behalf of Wesleyan, January 2017.

'WESLEYAN’ is a trading name of the Wesleyan Group of companies.

Wesleyan Assurance Society and Wesleyan Bank Ltd are authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Wesleyan Financial Services Ltd, Wesleyan Unit Trust Managers Ltd, Practice Plan Ltd and DPAS Ltd are authorised and regulated by the Financial Conduct Authority.  Advice about investments, insurance and mortgages is provided by Wesleyan Financial Services Ltd.

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© 2018 Wesleyan Assurance Society