Early Start Not Enough on Its Own

SCOTTISH & Newcastle commercial assistant Stephanie McPherson has already been saving into a pension for seven years, thanks to mum and dad, who took out a policy on her behalf with Standard Life when she was 15, writes Teresa Hunter.

Stephanie, now 22, says: “They were worried there would be no state pension by the time I retired, so they wanted me to start saving for retirement at the first opportunity. When I started work I just kept paying in what they had. “

They began making a GBP 15.60 monthly contribution with Standard Life, which grosses up to GBP 20 with tax relief. Commendable though their efforts were, this will not provide Stephanie with an adequate pension.

These contributions would produce a lump sum of GBP 88,780 when she retires in 2054 at 68. This would buy her an annual income of GBP 3,500 at today’s annuity rates.

Stephanie, of Edinburgh, only recently began working for Scottish & Newcastle as a commercial assistant, and although she has not yet joined the pension scheme, she probably will. Either way, she needs to significantly increase her savings.

Standard Life’s Andrew Tully adds: “She’s done the right thing starting young, but if she wants to retire on half her earnings she’ll need a lump sum of GBP 450,000. She needs to be putting GBP 260 aside until retirement.”

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