Millennials are the only age group to experience a drop in their pension savings as new data reveals that 50 per cent of millennials were saving less in 2016 than they were in 2012.
Analysis of Office of National Statistics (ONS) data by financial services consultancy, Equiniti revealed that during the period between 2010 and 2012, 35 per cent of those aged between 25 and 34 were contributing to a workplace pension, compared to 54 per cent of those from the same age group in 2016. But despite the increase in pension membership, the overall savings fell from £12.8bn to £12.2bn.
Millennials are the only age group to have experienced this decline, Professional Pensions said.
Sarah Hamilton, senior pensions consultant at Aon commented: “Many companies scaled back more generous contribution structures as a method to help manage the cost of auto enrolment. Therefore, where companies traditionally struggled to get millennials to join a pension scheme prior to auto enrolment, the proportion of millennials now on these lower auto enrolment minimum contribution structures has increased.”
In some circumstances, auto enrolment has led to smaller pension pots for this age group due to low contribution rates among 25-34 year olds. In comparison, Generation Z, those within the 16-25 age group, increased their pension savings from nearly 0.6bn to £1.1bn.
Meanwhile, those who were aged between 25 and 34 prior to 2012 were ‘more likely’ to benefit from generous company defined (DC) schemes. The average pension pot of this group amounted to £9,400 between 2010 and 2012.
Chris Connelly, Equiniti propositions and solutions director described auto enrolment as a ‘great success’ in improving the proportion of pension savers, particularly among the younger age group where participation levels have increased significantly. But, he added, it was ‘crucial’ that first-time pension scheme members did not consider enrolment as ‘job done’ and disengage from their savings.
The analysis comes as minimum total contributions increased from 2 per cent to 5 per cent with an additional 8 per cent increase expected in April 2019.
Hamilton added: “For a long time, there has a concern within the industry that individuals may be misguided into believing that the minimum contribution rates set by the government will be enough to give them a suitable level of retirement savings. Educating savers to understand that this may not be the case and providing easy access to planning tools that give a realistic idea of the level of regular savings needed has never been more important.”
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