Young people are opting out of auto-enrolment

A majority of young people between 22 and 29 are expected to continue paying into their pensions after minimum contributions rise in April 2018 and 2019, according to a new report by Scottish Widows. Despite concerns from the younger generation that contributions for pensions are growing too high, pension company Scottish Widows is worried that many of those under 30 are at risk of a pension shortfall when they reach retirement.

The average expected pension of under-30s will be almost £9,000 below the income needed to comfortably retire, with Scottish Widows finding that 70% are not saving nearly enough. Finding that younger workers are under considerable strain, more than half of those in their 20s don’t believe they can afford to save long term because of payments in the short term. Although 80% of young people are currently paying into their pensions, retirement specialists are worried that not enough is being done to ensure security in old age, especially as more than half are expected to opt out of auto-enrolment before 2019.

“Auto-enrolment may well be lulling people into a false sense of security that they are putting away enough for a comfortable retirement,” said Catherine Stewart, Scottish Widows retirement expert. “With one in every 12 private rental sector tenants now a pensioner, ‘Generation Rent’ is headed for a more expensive retirement than previous generations.”

Introducing an easily digestible YouTube series to encourage youth engagement and get people saving, the team is currently developing a mobile app to help keep track of savings. Starting retirement at a later date is a risky move, according to the team, who calculated that people risk having to pay in up to five times more money per month as they grow older compared to those who start their pension at the age of 25.

“While retirement may feel like a long time away for those in their 20s, it’s really important they start to think about it as soon as possible,” continued Stewart. “If we don’t get this right then it is far more difficult for them to reach their desired savings levels in their 30s and 40s.”