Research supports auto-enrolment
Young contributing more to pensions than older groups
More people in their 30s are thinking about their retirement than those in their 40s, according to new research which is seen as evidence that the auto-enrolment message is getting through to those in the early stages of their career.
Fidelity Worldwide has found that younger people have a higher participation in workplace pensions with figures showing 76% of thirty-somethings engaged in their retirement planning. Only 8% are not currently contributing anything into a pension.
Among the older group 69% are thinking about life after work, while 18% are not putting any monies aside. As many as 81% of the younger workers contribute to a workplace pension compared to 72% of those in their 40s.
Both groups say they are unsure where the majority of their retirement income will come from, saying their they simply don’t know. However, those in their 30s appear to view this as an impetus to save and engage while older workers seem to be less enthusiastic.
The research found more younger people (83%) personally contribute up to 5% of their monthly salary to a pension, against 72% of pension holders in their 40s.
Nearly a quarter (22%) of the older group register lower engagement and are not able to say how much they make in pension contributions each month, suggesting they have no clear view on how much they have accumulated. This compares to just 12% for those in their 30s.
Richard Parkin, head of retirement at Fidelity Worldwide Investment, said: “You would normally think that people who are closer to retirement would automatically be more engaged with the issues however, our research has shown this is not the case.
“There are a variety of reasons why – people in their 40s may be facing greater financial and family commitments that divert their attention and it would be unfair to ignore the very real costs and demands that people face.
“Our research does however show a great success for what the auto-enrolment policy was aiming to achieve, namely an increase in participation in workplace pension saving.
“With people so unsure in both age groups about where they are going to get their retirement income, it’s clear that harnessing inertia from “do nothing, get nothing” to “do nothing, get something” has had a genuine impact with only 6% in each group saying they contribute nothing to a workplace pension.
“It is unfair to lecture people by simply saying “save more” however, research has shown that consistency of contributions is key to good retirement outcomes as opposed to more.”