Prior to the Covid pandemic saving for a pension was not a high priority for the younger generation. They were struggling to buy their own home or save regularly to do this and post-pandemic this may be even more difficult with rising unemployment, a drastically different working environment and maybe even tax increases to pay for government furlough and business support. It is even expected that the pension starting age will rise even further, so it is not surprising that some research has found that many in the age bracket o 18 – 34 have either stopped or reduced their contributions.
Some have even said that they have no pension savings at all.
The government’s auto-enrolment has helped head off a crisis but there are many individuals not taken into account if they are I casual employment or self-employed. For these to fund a self-invested personal pension or a SIPP can be difficult if money is tight and retirement seems a long way off. Auto-enrolment contributions start at age 22 so there is nothing set in place for those earning and under this age.
Sometimes the language used could help perhaps by saying that a 12% contribution would keep you above the poverty line whilst a 15% contribution would allow for a comfortable retirement. One of the problems of auto-enrolment pensions is keeping tract of different pots if you move around jobs. It could put youngsters off if they have to consolidate and transfer pensions. I there was a default option to have employer contributions to go to a company scheme or to a pre-existing SIPP this would simplify the pensions savings process.
Many youngsters could be more onboard with saving for a pension if they felt their investment was helping, such as green investing and protecting the planet. It is not all doom and gloom as those in the 18 – 34 year bracket with a SIPP invested more or opened a new account during lockdown and a quarter more were likely to set early retirement as a financial goal following the pandemic. Perhaps a lifetime ISA should be considered as at least this is still saving.