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DISCUSSION PAPER PI-0606

There’s No Time Like the Present: The Cost of Delaying Retirement Saving

David Blake, Alistair Byrne, Andrew Cairns and Kevin Dowd

Many people delay joining a pension plan until well into their working lives.
We use a stochastic simulation model to show the cost of this delay in terms of
the higher pension contributions that must eventually be paid to ensure an adequate
retirement income. We find the levels of contributions required for individuals who
start saving late are so high it is questionable whether they are affordable for anyone
not on a high income. We also analyse the cost in terms of reduced pension of an
interrupted labour market history, such as that experienced by someone who leaves
work for a period to bring up a family.