In recent years, saving for retirement has fallen out of fashion.
Mis-selling scandals, Gordon Brown’s tax raid and plunging annuity rates have robbed pensions of their credibility.
Since the crisis, most people have been too concerned about paying their everyday bills to trouble themselves about saving for some distant retirement date.
But fashions change, and the number of people saving for retirement has now hit a five-year high.
Pensions are cool again.
Pension Panache
More than half of us are now saving adequately for retirement, according to the 10th Scottish Widows Retirement Report.
Some 53% are investing enough to fund a decent retirement, the highest figure since 2009.
While that number could be better, it still marks a big leap on 2013, when the figure was just 45%.
That’s the biggest year-on-year increase Scottish Widows has ever recorded.
Pensions have returned in style.
New Model Pension
The economic recovery is one reason. Although wages continues to trail inflation, more of us can afford to start investing for the long term.
The new auto-enrolment pension scheme, which is giving millions of low-paid workers a company pension for the first time ever, has accelerated the trend.
The average worker in a company with 250 staff or more now has 11.6% of their income going into a pension, more than the auto-enrolment minimum target of 8%.
Clearly, the message about saving for the long term has caught on.
Smart Savers
Not only are more of us saving, but we’re increasingly investing outside traditional pension schemes.
The average person is now saving £130 towards retirement outside a pension.
That’s marks a 141% increase since 2006, when the figure was £54.
Today, the average person has £40,000 in savings and investments. That figure is distorted by super-rich savers, but once you strip them out, it still totals £33,678.
That is £5,000 up on 2013.
The Nisa ISA
The enduring popularity of tax-free ISAs is probably the main reason so many people are saving outside a pension.
Now they’re set to get even more popular.
From 1 July, every UK adult will be able to save or invest up to £15,000 in the so-called New ISA, or Nisa.
You can even put your full allowance into cash, although I wouldn’t recommend that, unless you’re happy with a savings rate of 1.58%, which is what the average cash ISA pays today, according to Moneyfacts.co.uk.
Stylish Stocks
Your money will work a lot harder if you invest in the stock market, either through funds or individual company shares.
Just make sure you understand the risks, and only invest money you won’t need for the next five or 10 years, to give you time to overcome any short-term volatility.
It has been a long wait, but investing for the future is finally back in fashion. This is one trend you don’t want to miss.
