'Generation Y' is beginning to grasp the importance of saving for retirement, according to research by Friends Provident, with 44 per cent of 21-29 year olds already paying into a company pension.

Thirty-give per cent added that they intend to start contributing to a pension before they hit the age of 30, and 43 per cent will be using an ISA or investment (equity) portfolios (35 per cent) to complement their retirement savings.

Eleven per cent, however, said they will not be using a pension to fund their retirement.
The financial-savvy respondents also said they are prioritising paying off debt over saving for a house (25 per cent) or funding a career break (11 per cent).

James Ward, director of UK Corporate, said: "In the current economic environment it is very uplifting to see that the younger generations are taking financial matters into their own hands. It is encouraging to see a large percentage of twenty-somethings taking responsibility for their finances and planning for their future at such a young age and rightly so."

Fifty-nine per cent of 26-29 year olds are already paying into a company pension scheme, which Ward said "can only be a good thing and if such laudable behaviour continues we could see a healthier or brighter picture of retirement in the decades to come".

Friends Provident also found that, encouragingly, 58 per cent of people in their twenties recognise that the state pension will not be enough to support them in their retirement.

"With the Chancellor's pre budget report adding yet another unwelcome layer of complexity to pensions in the UK we need to continue to highlight the benefits of saving. It is encouraging to see some of that message is being understood and younger generations are grasping the nettle and getting their finances in order," Ward concluded.

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