Homes helping to fund retirement

The level of people contributing to personal pensions has been steadily declining during the 10 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 has fallen 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% in 1995 to just 13% in 2005.

Only pension saving among those aged between 55 and 64 remained steady at 20%, while just 2% 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 10 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% 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, senior researcher at the International Longevity Centre, warned that younger people were putting too much money into property at the expense of saving into a pension.