Pensions saving falls as property seen as way to fund retirement
The percentage of people contributing to personal pensions steadily declined during the ten years to 2005, according to research commissioned by financial services groups Prudential and Partnership Assurance.
The report, which was carried out by think-tank International Longevity Centre, said the proportion of households putting money into a personal pension fell or stayed the same across all age groups during the period.
The decline has been steepest among young people, with the proportion of 25-to 34-year-olds saving into a pension halving from 26 per cent in 1995 to just 13 per cent in 2005.
Only pension saving among those aged between 55 and 64 remained steady at 20 per cent, while just 2 per cent of those aged between 16 and 24 now pay into a personal pension. The report also found that substantial numbers of people who had been contributing to pensions were no longer doing so.
The research, which tracked the same group of people for ten years, found that, while just over one in four people were paying into a pension when they were aged between 25 and 34, this dropped to 20 per cent as they got older.
By contrast, property came to represent a significantly larger proportion of household assets, particularly among younger age groups.
Strong house price growth during the period meant the rise in property values outweighed the increases in mortgage debt, and helped all age groups increase their net liquid assets.
James Lloyd, a senior researcher at the International Longevity Centre, warned younger people were putting too much money into property at the expense of a pension.
He said: "Despite the property wealth of older households more than doubling during the decade after 1995, these rising property assets are not actually resulting in an improved standard of living for older people in retirement.
"Now a new generation are seeing their retirement saving skewed toward property assets, with bigger mortgages and falling contributions to private personal pensions.
"But the young risk being let down badly if they think that buying a property is the best way to save for retirement. Property should be part of an portfolio, but not the only part."
Ian Owen, chairman of Partnership Assurance, said: "The move toward property as a vehicle for retirement saving underscores the need for high-quality financial advice and education."