Over the period, overall savings built up by workers aged 25-34 have declined from £12.8 billion to £12.2 billion. This makes millennials the only age group to see a drop in total pension wealth while, in contrast, the 16-25 age group has seen their pension wealth nearly double from just over £600 million to £1.1 billion.
Millennials have seen participation rates rise significantly as auto-enrolment drives more of the youngest workers towards later-life saving. Just over a third (35%) were contributing to a pension in 2010-2012 but this has now risen to 54%, with the 19-percentage point increase the largest of any age group.
Increased participation has diluted the size of the average pension pot as more millennials take the first steps towards building up provisions for retirement but save less. In 2010-2012, the median pension pot for 25-34 year olds stood at £9,400 but this has now nearly halved, declining to £5,000.
Chris Connelly, Propositions and Solutions Director at Equiniti, believes that the statistics demonstrate that employees cannot rely on auto-enrolment to provide them with a heathy later-life income but believes increased digitisation and education are improving millennial saving trends:
“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.”
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