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Young People Are More Likely to Opt Out of Pension Schemes Barnett Waddingham Finds in New Report

Independent consultancy, Barnett Waddingham has revealed that only 37 per cent of workers with a defined contribution (DC) pension have checked their pension online at least once. The news arrives as the consultancy looks to uncover the attitudes and behaviours of the UK’s retirement savers.

The research shines a light on the nation’s pension apathy, and its impact on confidence about retirement. This is particularly evident in those looking to retire within the next two years. Almost four in 10 people (37 per cent) are reliant on paper statements for their pension as they haven’t logged in online to see what they have.

Mark Futcher, partner and head of DC pensions at Barnett Waddingham
Mark Futcher, partner and head of DC pensions at Barnett Waddingham

Mark Futcher, partner and head of DC pensions at Barnett Waddingham, said: “The UK’s auto-enrolment system has hatched a generation of pension ostriches. With pensions – and personal finances in general – feeling complex, overwhelming, and often disheartening, many savers are simply refusing to check the status of their pots, nevermind making decisions to improve the outcomes. But burying your head in the sand won’t do you any good in the long run.

“Defined contribution pensions can be brilliant. Our latest analysis of the UK’s master trust landscape painted a picture of strong governance, good returns, and low fees. The problem lies in people saving too little, and employers failing to encourage better habits – like auto-escalation of contributions at the point of pay rise or career break.

“If everyone took twenty minutes to log in to their workplace pension, use a calculator to check the expected pot at retirement, and consider the possibility of increasing the contribution by just one per cent this year, we’d be a big step closer to tackling the looming pensions crisis in the UK.”

No awareness

The lack of visibility born of not checking how much is in a pension plays out into other financial planning decisions. Fifty-seven per cent of people have used a pension calculator to see how much will be in their pot at retirement; 43 per cent have not.

Additionally, 67 per cent of people have never spoken to a financial adviser about their pension. Twelve per cent have done so once. The number of people who have spoken with an advisor doesn’t notably increase as people approach retirement. Although, men are far more likely to have done so than women (42 per cent vs 27 per cent).

Who’s changing their pension contribution?

In turn, most British savers are either trusting or apathetic about their pensions – almost three-quarters (72 per cent) have never changed how their pension is invested. Specifically, this is true of 66 per cent of 25-30s and 72 per cent of 31-35s, who are sitting in their scheme’s default fund – which is often too low risk for this age group, and may not generate the returns needed for a healthy retirement pot. Women are more likely to be in their default fund than men, at 79 per cent to men’s 62 per cent.

As well as being in the default fund, most workers are contributing the default amount – which is unlikely to be enough for a comfortable retirement. Only 41 per cent of people have ever increased their monthly pension contributions – 13 per cent have done it once, 15 per cent a couple of times, seven per cent ‘a few times’, and five per cent do so consistently.

This leaves 59 per cent of people – rising to 66 per cent of women – contributing the bare minimum, usually five per cent of their salary (with three per cent matched by their employer). Meanwhile, just 23 per cent have ever put a lump sum of money into their workplace pension, again driven by men (32 per cent versus 17 per cent of women).

Opting out of a pension

On the other side of the fence, a concerning 26 per cent of people have previously opted out of their workplace pension, rising to a whopping 55 per cent of 18-24s and more than a third (36 per cent) of 25-30s. Likely driven by the harsh increases to the cost of living, pausing pension contributions has brought a few more pounds into the bank – but at the sacrifice of a safety net in later life.


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