Young people want to save for the future, but prevented from doing so, says PLSA

Young people want to save for the future but are prevented by short-term costs, a pension industry body said on Friday.

According to research by the Pensions and Lifetime Savings Association (PLSA), 18 to 35-year-olds want to save, feel they ought to save, but simply cannot afford to do so.

They get no sat-is-fac-tion

Over half of respondents to the PLSA survey of 962 adults, said they gained more satisfaction from saving money than spending and 53% disagreed with the idea their generation lives for today and tomorrow can wait.

Over the last six months 77% said they felt the same or increased pressure to save for the future and only 6% said they felt the pressure had decreased.

Some are managing to save, but for the short term as 34% are saving for a rainy day and 32% are saving for a one-off purchase such as a holiday or car.

Nearly half of respondents said the cost of living is too high and 43% say their salary is too low. One in five feel their lifestyle stops them saving, but one in three said their mortgage or rent stops them from saving. If they could save 42% said they would prefer to invest in property in order to get the best return.

Pensions and student debt a mere fact of life

About 57% said they do not have any debt, apart from their student loan and 65% said they do not acquire any debt on a monthly basis. For young people who have a student loan 54% do not consider it as debt, which suggested student loans have become a fact of life for their generation.

PLSA chief executive Joanne Segars, said: “Our research suggests many 18 to 35-year-olds shy away from the sort of investments that give better returns over the long-term, but it also suggests that where a financial decision or situation becomes a fact of life, for example student loans, this group quickly accepts it and adapts.

Segars said this behaviour was similar when workplace pensions was introduced as only 7% of under 35-year-olds opted out of enrolment.

In a workplace pension, employee contributions are doubled by contributions from the employer and tax relief from the government. Early savings benefit from compound interest, investment growth and time to recoup any losses. By 2018 every workplace will have a pension scheme.

Segars added “Those younger savers staying in their workplace pensions are smart. Automatic enrolment provides them with a hassle-free way to save for the long-term – they don’t have to think about the investment strategy, or choosing the product, or moving their money, they just have to keep saving.”

Interest rates, saving accounts and ISAs, oh my

When choosing saving products almost half said the interest rate was important factor and 30% said they wanted access to their money at any time with no fees. The majority of young people thought that saving products are designed for people who already have money.

The survey found that although they wanted to save but are curbed by short term costs, there is comparably little interest in individual savings accounts (ISAs), or investing in the stock market. About 41% of 18 to 35-year-olds have opted for a savings account and only 26% have a cash ISA.