Around 23 per cent of young adults have never heard of pension auto-enrolment despite proposals to extend the scheme to 18-year-olds, according to Standard Life.
According to Standard Life’s 2023 Retirement Voice study one in 10 young people (18-24 years) are vaguely familiar with auto-enrolment while a fifth say that they know a lot about it.
It also found that new workers do not prioritise saving for pensions over other financial goals. Although few are aware of it, 42 per cent of adults (18–24) who are familiar with auto-enrolment consider it to be an important motivator for saving.
Employers are required to enrol all employees who are 22 years of age or older and make more than £10,000 per year in a workplace pension. The implementation of reforms, such as removing the lower salary restriction and lowering the eligibility age to 18, is still pending.
Meanwhile, contribution increases, particularly to 12 per cent as suggested by Phoenix Group, can improve pension results considerably, with an additional £217,000 possible for individuals who begin saving at age 22 and make contributions at the Living Pension target.
Standard Life managing director for workplace pensions Gail Izat says: “Over a decade on, auto-enrolment has clearly had huge benefits for the UK’s pension savers, helping to fill the gap created by the demise of Defined Benefit schemes and establishing retirement saving as the norm in workplaces across the country. One of the biggest successes of auto-enrolment has been the low level of opt-outs, partly due to the rise of saving by inertia.
“As people move through their careers, however, the importance of taking an active role in retirement planning increases and lack of engagement can mean people often don’t have the chance to review how much they are saving, review this in the context of what it might mean for their future retirement and adjust their contributions accordingly to meet their retirement goals. In the Autumn Statement the Government announced a consultation into legislating for a pot for life, which would give people the option of choosing a pension that would follow them from job to job.
“These figures highlight potential challenges with getting people to engage with their savings given low levels of knowledge and the need for careful thought around how we take the system from one based on inertia, to one that would require more active choice from savers.
“There are significant steps currently being taken to increase the amount people are saving into their auto-enrolled pension scheme, including a new law to lower the minimum age to 18 and remove the ‘lower earnings trigger’ of £6,240. However, the single biggest thing that people can do to boost their chances of securing a decent fund for their retirement is raise their contributions as soon as they can to benefit from investment over a longer period.”
