Jessica BirdYounger employees aged between 18 and 34 are contributing, on average, £274.50 to their pension each month – almost 10% of their wage, and almost twice as much as older workers, according to research by Royal London.
The report, ‘Workplace Pensions: Are they working hard enough?’, found that older workers were coming to terms with the fact that they will have to live a more modest and frugal lifestyle in retirement, and regret not saving more or starting to save earlier in their careers.
The younger age group is more likely to be taking advantage of employer-matching contributions (51%) compared to those aged 50 and above (38%) and they are more proactive in managing their pots – with only 10% of those aged 18 to 34 having never checked how much their pensions are worth.
Younger workers believed they would need £45,000 a year for a good retirement – more than any other age group predicted, and more than the amount needed for a single person to live a ‘comfortable’ or ‘moderate’ lifestyle in retirement, according to the Pension and Lifetime Savings Association (PLSA).
On the other hand, those aged 50 and above expected to need just £25,000 to £35,000 a year, but recognised that this would result in them having to be more frugal.
Clare Moffat, pensions expert at Royal London, said: “Our research showed the average monthly pension contribution for workers aged 18-34 was £274.50 compared to £149.50 for all the other age groups and there are several things that might have influenced this.
“Contributions vary widely across genders, income, age and if someone works full or part-time. In general, those who are lower paid – often women, older employees and part-time workers – tend to pay less into their pensions and the fact they are paid a lower salary also means less is contributed into their pot from their employers.
“Although a difference in attitude might be one driver for younger workers saving into their pensions more avidly, it could also be that younger workers have lower overall outgoings.
“For example, if they’re yet to have a family, it might mean they aren’t paying higher costs for larger family sized homes, they won’t be paying childcare costs, nor will they be working reduced hours around childcare needs, meaning they could have more disposable income to channel into their pension pots.”
Both retirees and those who had not yet retired said that their biggest financial regrets were not saving more for retirement, or saving into their pensions earlier (31%).
Moffat said: “I have never met anyone who said that they wish they had paid less into their pension. It’s also not surprising that around a third of people from our research wished they’d saved more for retirement, could save more now or had saved into their pension earlier. But it’s never too late.
“Saving early means you benefit from the magic of time, but paying into your pension at any point in your life means that you’ll benefit from tax relief, which is the government top up to your pension.
“If you’re an employee, then you may also benefit from an employer pension contribution.
“You could also consider putting more into your pension if you’ve had a pay rise or perhaps you could put any bonus you receive in there, if you don’t immediately need it.
“If you’ve paid off your mortgage and have more disposable income, perhaps you could pay the equivalent of your old mortgage payments into your pension going forward, if it’s financially possible.”
