Young people are being urged to start investing early amid warnings the State Pension age could keep rising – and may not even exist by the time today’s teenagers retire. An independent Government Review previously suggested the State Pension age could rise to 74 by 2065, raising concerns about how future generations will fund their retirement.
Now, financial expert Michele Tieghi, founder of personal finance platform PsyFi Money, has said that even a modest investment could grow significantly over time thanks to the power of long-term compounding. He explained how putting away as little as £100 today could eventually turn into £10,000 – or even £100,000 if a larger amount is invested. Long-term compounding is the process by which investment returns begin generating returns of their own.
Instead of only earning money on your original investment, you start earning money on the accumulated gains over time. Over several decades, this effect can accelerate rapidly, leading to exponential growth from relatively small starting amounts.
One of the most passive ways to invest is through low-cost exchange-traded funds (ETFs) or index funds that track major stock markets. Popular examples include funds that follow the FTSE 100, the S&P 500, or more general global stock market indexes. Historically, these types of investments have delivered average annual returns of around 7 to 10%. When dividends are reinvested, those returns compound over time.
Mr Tieghi said: “For example, if you invested £100 into a stock market that offered a 10% annual return, then it would take 48 years for that money to reach £10,000. It’s important to remember that this is long-term investing. It’s not a get-rich-quick scheme, unfortunately.
“However, for young people looking to prepare for retirement, it’s a great way to put a little bit of money aside now to help you significantly in later life.”
While £100 can be a starting point, investing larger sums under the same conditions over the same period could potentially grow to £100,000.
The current UK State Pension age is 66, but it is already scheduled to rise to 67 between April 2026 and April 2028. Experts believe increases may continue as life expectancy rises and pressure on public finances grows. Some analysts have even warned the State Pension could look very different – or potentially disappear altogether – by the time people currently in their teens or 20s reach retirement age.
Mr Tieghi said that young people need to start thinking about their retirement much earlier than previous generations: “Putting aside a small sum, like £100 to £1,000, and investing it wisely will seriously help them in later life.
“It’s no secret that Britain is heading into a potential social care nightmare, so it would work in the Government’s favour to encourage young people to start investing smartly today.”
