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Mind the savings generation gap

Posted on 21 July 2015

The difference starting to save early can make

According to our research, the news on saving money is good. Apparently, we all agree that putting some cash aside for the future is important. Gold stars all round. But delve a little deeper, and you soon find the gold stars should be awarded more for good intentions, than for actual effort.

The top financial hope of the under 50s is to save more, while the biggest financial regret of the over 50s is not saving enough. So what happens in the years between our carefree youth and wiser later years? Clearly not enough in the savings department. Despite our best intentions, we’re not all putting our money where our piggy bank is.

Let’s face it, spending money is essential and also on occasion, great fun. Saving on the other hand, can feel like a chore or just an expense too far. But the reality is it may not be quite as hard as we think.

When it comes to putting money away for the future, the early bird really does catch the worm. Starting to save early in life, even just a few pounds a month, can pay off in our later years. Our latest infographic simply demonstrates the difference starting to save sooner rather than later can make to the size of a savings pot, further down the line.

It also explains what you need to know about ISAs – Individual Savings Accounts - a popular choice amongst the nation’s savers for their tax efficiency and flexibility.

If you’d like to save more, but are struggling to see where to find some spare cash to do so, why not try our free savings calculator. It can help you see how making a few small changes here and there could really boost your savings efforts.

blog-savings-generation-gap-ISA-infographic

The Savings Generation Gap

A common tip we hear from the older generation, is to start saving sooner rather than later but many people realise too late the difference saving a small amount on a regular basis can make.

It could pay to start saving early

Meet old school friends Pete and Steve. As soon as he turned 25, Pete started saving £10 every month. Steve took a different approach. He decided to delay saving until he was 45, then started saving £30 every month. By the time Pete and Steve reached their 55th birthdays, both had saved exactly the same amount of money - £3600.

But the size of their savings pots was very different. Pete who had saved £10 a month for 30 years, was almost £1000 better off than Steve, who’d saved 3 times more a month - £30 - over just 10 years.*.

Financial hopes and regrets

The top three financial hopes for 18-50 year olds were to save more, be debt free and buy a home. In contrast, the top three financial regrets for over 50s were not saving or investing enough, making bad or the wrong investments and not having enough in a pension.

ISAs**… did you know?

  • ISAs are Individual Savings Account that let you save money tax efficiently.
  • Three quarters of ISA holders have an average annual income less than £30,000?
  • There are 22m+ ISA holders in the UK – with an equal split between men and women.
  • 46% of ISA holders are over 55.
  • 34% of ISA holders are aged 35-54.
  • 20% of ISA holders are under 35.
  • The average savings of ISA holders under the age of 25 is £3,247.
  • The average savings of ISA holders over the age of 65 is £34,705.

Five ISA must knows

  1. Two types of adult ISA - Cash ISA: a savings account paying a fixed or variable interest rate. Stocks & Shares ISA: An investment-based account where the value can go up or down depending on the performance of the stock market.
  2. ISA tax benefits –There’s no tax to pay on any growth in value or income you earn from your ISA.
  3. Annual ISA limit - In tax year 2015/16 up to £15,240 can be split in any way between a Cash ISA and Stocks & Shares ISA.
  4. Ways to pay in- regular payments, a lump sum or a combination.
  5. Flexibility – Money in a Cash ISA can be moved to a Stocks & Shares ISA and vice versa.

How tax affects you depends on your individual circumstances and tax law could change in the future.

Sources:

SunLife’s ‘Life’s what you make it’ research March – May 2014

* This example illustrates the effect of fixed compound interest over time and is based on compound interest of 2% per year. It is not intended to represent any particular financial product and does not take into account the effect of tax or inflation.

** HMRC ISA Statistics – April 2015. All figures 2012-2013 tax year excluding Junior ISAs.

SunLife offers a range of straightforward and affordable products including over 50s life insurance, funeral plans, equity release, pet insurance, home insurance, car insurance, ISAs and Will writing services.

Here's the information that you need to know about who we are and the other companies that we work with in order to provide our products and services.

Who are SunLife?

Phoenix Life Limited trades as SunLife and is the provider of the Guaranteed Over 50 Plan, SunLife Insurance and the life insurance policy payment option for Funeral Plans. Phoenix Life Limited’s registered office is at 1 Wythall Green Way, Wythall, Birmingham, B47 6WG (registered in England, no. 1016269). 

SunLife Limited distributes financial products and services and is a company limited by shares, registered office: 1 Wythall Green Way, Wythall, Birmingham, B47 6WG (registered in England, no. 05460862). SunLife Limited is authorised and regulated by the Financial Conduct Authority and is entered on the Financial Services Register (registration no. 769427).

You can contact us by post at SunLife, PO Box 1395, Peterborough, PE2 2TR or by phone on 0800 008 6060.

If you choose to add Funeral Benefit Option to your Guaranteed Over 50 Plan, Dignity Funerals Ltd arranges and provides the funeral services, registered office: 4 King Edwards Court, Sutton Coldfield, West Midlands, B73 6AP (registered in England and Wales, No. 00041598). Dignity Funerals Ltd is a member of the National Association of Funeral Directors.

Who provides the Funeral Plans?

Dignity Funerals Ltd arranges and provides the funeral services, registered office: 4 King Edwards Court, Sutton Coldfield, West Midlands, B73 6AP (registered in England and Wales, No. 00041598). Dignity Funerals Ltd is a member of the National Association of Funeral Directors.

The life insurance policy that pays for your funeral will be provided by Phoenix Life Limited, trading as SunLife.

Who provides My Smarter (ISA)?

My Smarter (ISA) is provided by Scottish Friendly Asset Managers Limited. Authorised and regulated by the Financial Conduct Authority. Details can be found on the Financial Services register, registration No. 188832. Member of The Investment Association. Registered Office: Scottish Friendly House, 16 Blythswood Square, Glasgow G2 4HJ.

Who provides the Will writing services?

Hugh James is authorised and regulated by the Solicitors Regulation Authority (SRA Number:303202).

The information contained on this website is based on Hugh James' understanding of the law of intestacy in England and Wales only as at April 2014. The law in Scotland and Northern Ireland is significantly different. This is for information purposes and is not intended to be legal advice.

Who provides SunLife Pet Insurance

SunLife Pet Insurance is arranged and administered by BDML Connect Limited. BDML Connect Limited is authorised and regulated by the Financial Conduct Authority (No. 309140). Registered in England and Wales Number 02785540. Registered Office: 45 Westerham Road, Bessels Green, Sevenoaks, Kent, TN13 2QB.

Who provides SunLife Home Insurance

SunLife Home Insurance is arranged and administered by BISL Limited and underwritten by a panel of insurers. BISL Limited are an intermediary authorised and regulated by the Financial Conduct Authority. Registered in England no. 03231094. Registered office Pegasus House, Bakewell Road, Orton Southgate, Peterborough PE2 6YS.

Who provides SunLife Car Insurance

SunLife Car Insurance is arranged and administered by BISL Limited and underwritten by a panel of insurers. BISL Limited are an intermediary authorised and regulated by the Financial Conduct Authority. Registered in England no. 03231094. Registered office Pegasus House, Bakewell Road, Orton Southgate, Peterborough PE2 6YS.