The gap between becoming mortgage-free and retirement is closing in for British workers, according to a new report – meaning they will have less time after paying off their home loans to save aggressively for retirement.
Research from Santander Savings shows that those who took out mortgages between 2000 and 2010 will have an average ‘savings window’ of just 10 years open to them. Conversely, people who first bought properties in the 1960s had an average savings window of 21 years – a period of ‘golden opportunity’ for adding to their nest eggs and planning for a comfortable retirement.
According to the bank, people who have recently taken out mortgages, or are yet to do so, may find it far harder to save for retirement than previous generations.
Saving for retirement
Reza Attar-Zadeh, director of savings and investments at Santander, commented: ‘For many people the period when they are still in employment but mortgage-free represents a golden opportunity to get some cash in the bank in preparation for retirement.
‘This window has more than halved since the 1960s and the opportunity to save is getting smaller and smaller. Our advice to people is to start saving as early as possible, even if they put away small amounts every week or month.’
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Start retirement planning sooner
Which? pensions expert Ian Robinson says: ‘The pressures on young people, who face high house prices as well as mortgages that often last for longer than the standard 25 years, may mean preparing for retirement is towards the bottom of the financial priority list. However, as soon as you start working it’s crucial to begin thinking forward to the time when you’ll want to stop.
‘The sooner you start paying into a pension fund, the better. The effect of compound returns means that putting smaller amounts aside over a long period of time will help you build a worthwhile pension pot.
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