Workplace pensions are minefield for millennials
6 November 2017
Workplace pensions remain a minefield for many millennials, according to new research by Aegon.
The research revealed that nearly a quarter of the respondents aged 18-34 years old with a workplace pension had no idea how much their employer pays into their workplace pension and 41% said they were unaware that they get tax relief on their pension contributions.
Kate Smith, head of pensions at Aegon, described the lack of understanding among millennials as “worrying” and highlighted a need for greater encouragement, guidance and pensions education.
She said: “This worrying lack of understanding means that young savers in the workplace might be missing out on some of the benefits a workplace pension can offer if they opt-out or fail to maximise their employer’s pension contribution. Every year that passes in which this young generation doesn’t take advantage of the benefits of tax relief or employer contributions is a year of potential free money and investment growth lost.
“In addition to tax relief and employers’ contributions, the effect of compounding means savvy millennials have the edge in accumulating wealth for later life, and the earlier they start the better.”
The research also revealed a desire among millennials for greater support from employers, with 51% stating they did not feel they were being actively encouraged to check their pension, while 58% said they felt it was the duty of the employer to help them plan for retirement.
Smith added: “As the main route for employees to save for retirement, the workplace is the perfect place to encourage employees to engage with pensions. And the results of our research show that this would be warmly welcomed and needed by most. We’d like to see more employers encouraging their younger employees to get into the habit of saving through their workplace pension.
“While auto-enrolment gets people out of the starting blocks, it’s only a small part of the solution to saving for retirement. Employees should be encouraged to build on this to take an active role to grow their retirement savings.”
On a positive note, the research found that out of all the age groups, millennials were the most likely to have picked their own investment funds, with 30% taking responsibility for their retirement planning. This compares to 20% of 35-44 year olds and 15% of 45-54 year olds. Aegon said the trend was suggestive of young people taking a “greater interest” in what their savings are invested in, with evidence pointing towards more socially responsible investment strategies.
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