Young adults to put in this exact amount for 'comfortable retirement' pension experts say

Financial experts have suggested that Britons could be set for a 'comfortable' retirement if they start saving an average of £275 per month into their pension from the age of 22. This could lead to a retirement pot of £560,000, based on an average annual return of five per cent, which is a staggering £20,000 more than the current minimum pension pot recommended by The Pension and Lifetime Savings Association's (PLSA) 2025 Retirement Living Standards.

Rotimi Merriman-Johnson from Mr MoneyJar has suggested that consistently investing £275 on a monthly basis could mean achieving this amount by the age of 67. Furthermore, not all of the £275 would need to come directly out of the individual's own pocket.

Under the Pensions Act 2008, every employer in the UK must put eligible staff into a workplace pension and pay into it, starting from their first day. This means if you are older than 22 and earn more than £10,000 a year, you are eligible for a workplace pension.

Following this, under auto-enrolment rules, the equivalent of eight per cent of your gross salary is put into a pension each month, however, only four per cent actually comes out of your salary. One per cent is in the form of government tax relief on the employee's contribution and the remaining three per cent is contributed by your employer.

This expert advice comes after research of 1,000 adults aged 18 - 28 found that 53 per cent are yet to start saving for their pension.

'The Gen Z Pension Report' by smart money app Plum found that one in five have not given any thought to their pension despite two thirds believing they will be able to retire comfortably.

On average, young adults will start taking their pension seriously at the age of 34. At the moment, over two thirds say retirement is too far away for them to worry about.

However, over a quarter don't think they earn enough to save at the moment and 16 per cent have never been told what a pension is or how it works. One in ten are honest that they don't understand how pensions work.

Rotimi, speaking in partnership with Plum, said: "Many people feel overwhelmed by pensions, but thinking about your future finances doesn't have to be daunting.

"The key is understanding how advantageous it can be to start investing in your pension as early as possible, to take advantage of the power of compounding. Saving money into your workplace pension also nets you 'free money' in the form of employer contributions and crucial tax relief from the government.

"Don't underestimate the impact that consistent, forward planning, and making the most of all available benefits, can have on securing the retirement you deserve."

The study found young adults would feel more assured about beginning a pension if they had a higher wage and clearer guidance.

They would like to understand how much they need to put aside for their retirement, and would appreciate having an app or tool to help them through the process.

Encouragingly, despite the knowledge gap, 85 per cent recognise that modest, weekly payments can make a difference to their pension pot.

And they believe they would need to put away an average of £306 each month, including their company's contributions, in order to retire comfortably in life, according to the figures by OnePoll.

Rajan Lakhani, head of money at Plum said: "Forward planning can literally make a world of difference to how you'll live your life. But it seems it's not very high on the agenda for young people and our research shows this could be down to lower salaries and lack of knowledge.

"It is however promising that they understand the importance of pension contributions for a comfortable retirement. And the amount that those polled think they need to save is close to the actual amount needed according to experts, suggesting they know what they need to do.

"Starting early with even small deposits to your pension is key as these add up considerably by the time you reach that stage.

"As well as your pension, it can be highly beneficial to save into a Lifetime ISA (LISA) as you can get 25 per cent of your contributions matched each tax year from the government up to £1000. This can be put towards your retirement or a house deposit."