For all of those who insist that they are too young to start saving towards their retirement, preferring instead to spend their extra income on holidays and fast cars, there is a stark warning from the latest industry research. According to the Norwich Union Retirement Index, the cost of living in retirement is rising at a much faster rate than the average income of a retired household - meaning that those who don't think about saving soon risk finding themselves in a financially tough situation once they finish working. To find a savings account to suit you, use UK Net Guide's Online Saving Search.

Apparently, the last ten years have seen the average pensioner household income rise by just over 30 per cent. However the average cost of household bills has gone up by nearly twice as much - 58 per cent. In the three months between April and June this year, household income rose by just 0.6 per cent, compared with a total expenditure increase of 3.8 per cent. Increases in the cost of gas electricity and council tax has been blamed, and should this trend continue it seems likely that living in retirement is going to become much tighter financially than we might expect.

The solution to this seems to be clear enough. We simply need to make sure that the rising cost of living is matched by rising incomes among the retired population. This simply means getting everyone to start saving more, and start saving earlier in their working lives. This will allow us to live comfortably in old-age, and even afford some of the luxuries that we've worked so hard to afford throughout our lives.

But already there is a little bit of a problem here. Getting people to start saving earlier does assume that young people have money to put away, and for many this might not be the case. The rising cost of living may be adversely affecting those of a pensionable age, but it is affecting young people too. And when you're struggling to afford the bills as it is, how attractive is saving some of your spending money for your future retirement going to be?

There are other factors that are going to make it difficult to convince young people to start saving. One is the inherent complexity in the pensions system, and the fact that young people, trainee accountants aside, are unlikely ever to be taught about simple personal finance issues. Saving and investing money is boring, while spending it is far more fun.

At the moment, the government is toying with the idea of an element of compulsion to get over this potential crisis in pensions, as the number of old people continues to increase. And maybe this is the best way to help a generation that will be happy to know that they are saving money for their futures so long as they don't have to organise any of it themselves.