Pension wealth drops for 25-34 year olds as auto-enrolment boosts take-up
New analysis has revealed that those aged between 25 and 34 have seen pension wealth fall between 2010-12 and 2014-16.
According to Equiniti, so-called ‘millennials’ saw accumulated savings towards retirement drop £12.2 billion from £12.8 billion over the period. As such, they are the only demographic to see a fall in total pension wealth.
For those below 25, however, it’s a different story where total pension wealth is concerned. Over the same timeframe, 16 to 25 year olds saw pension wealth grow from £600 million to £1.1 billion.
The rates of pension participation rate have seen a significant uplift since auto-enrolment schemes were rolled out across workplaces, with contributions being made to the later-life savings of younger employees.
In 2010-12, around 35% of 25 to 34 year olds were contributing in to a pension, a figure which has now grown to over half of the group (54%).
However, as a result of the increase in take-up, the size of the average pension pot has decreased; the median pot in 2010-12 was £9,400, a total which has now dropped to £5,000.
Commenting on the analysis was Chris Connelly. The propositions and solutions director at Equiniti said: “Auto-enrolment has been a great success in improving the proportion of pension savers, particularly among the younger age group where participation levels have increased significantly. However, it is crucial that those being auto-enrolled into pension schemes for the first time do not consider it ‘job done’ and disengage from their savings.
“Increasingly, this is the generation that expects to deal on their own terms. Therefore they will require no encouragement to take up digital services from suppliers, but they will require clear communication and engaging education.
“Passively following minimum contribution levels may not build up a pot big enough to secure the desired level of income in retirement. Millennials starting off on their pension saving journey should be encouraged to take a more active role in managing their pension savings so that they do not receive a nasty shock near retirement when it is too late to alter their habits.
“Last week, auto-enrolment saw its minimum contributions raised from 2% to 5%, with a further increase the following year taking it to 8%. It will be interesting to see how this affects opt-out rates, particularly among the younger generation of workers who often feel the greatest strain on their monthly wage packet. We must do more than just hope these savers will see the value of putting away money now to reap the benefits further down the line.”