Pensions have been dubbed the “secret to wealth accumulation” and are being urged to be prioritized by Britons.
PENSIONS HAVE DEVELOPED INTO THE MOST IMPORTANT PART OF BRITAIN’S TOTAL WEALTH.
As people accumulate wealth to be used when they stop working, retirement planning is one of the most important financial tasks they can undertake.
New data reveals that pensions account for the majority of overall wealth in the UK, emphasizing the importance of putting money aside for retirement.
The Office for National Statistics revealed today that the median household net wealth in the UK was £302,500 from April 2018 to March 2020.
After adjusting for inflation, that figure is slightly higher than the previous period, but it represents a 20 percent increase from July 2006 to June 2008.
Over the last 14 years, the percentage of wealth held in private pensions has risen, and private pensions now account for 42% of total wealth.
During the same time period, the percentage of wealth held in real estate fell slightly to 36%.
Financial and physical wealth, on the other hand, accounted for a smaller percentage of total wealth, at 13% and 9%, respectively.
There are three main reasons, according to Bestinvest, why pensions have become such a large part of overall wealth.
The first is that younger people are less likely to own a home.
Second, as global stock markets have risen, pension pots have increased in value.
Finally, auto-enrolment in workplace pensions, combined with an increase in the state pension age, has made a difference.
The data, according to Jason Hollands, managing director of platform Bestinvest, reflects growing pressure on workers to make their own retirement plans.
“People are waking up to the fact that they will need to focus on their own savings and investments to plan for a comfortable retirement,” he said.
Mr Hollands believes that the fact that final salary or defined benefit pension schemes have closed to new members, as well as the state pension age being steadily pushed back, has contributed to the shift in attitude.
“Auto-enrolment has obviously aided in this,” he continued, “leading to a massive growth in defined contribution pensions and turning a vast number of people into long-term investors for the first time – many of whom will have never taken financial advice.”
“As they change jobs throughout their working lives, they are likely to accumulate multiple pots, and keeping track of these is one of the challenges they face.”
“Brinkwire News in Condensed Form.”