PensionsFeb 13 2013

Only 30% of 16-25 year olds contribute to pensions

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Fewer than one-third of 16-25 year olds contribute to a pension but do not necessarily know into what type of scheme they are paying in to, a study has found.

Research by the Centre for the Study of Financial Innovation found only 30 per cent of 16-25 year olds contribute to a pension, while 40 per cent of these do not know what type of pensions they have.

Sophie Robson, author of the 52-page report Generation Y: The (Modern) World Of Personal Finance, said almost two-thirds of respondents have not had any formal financial education.

Ms Robson said: “Since young people receive the majority of their early financial education from their parents, it is important that this information is accurate and up-to-date.

“After all, generation Y-ers are growing up in a very different world to that of their parents, and it is more important than ever that they feel in control and comfortable with the concept of personal finance.”

The research also identified a gender divide when it came to financial knowledge.

According to the study, 72.5 per cent of males and 55 per cent of females believe they know enough about personal finance to make informed decisions.

Industry view

Stephanie Rochford, long finance community organiser for think tank Z/Yen, said: “Recent Office for National Statistics data shows nearly one in four children aged 20 in 2011 will live to be 100 years old but the financial system is still dominated by short-term thinking. Who really believes the retirement structure they enter into today will work effectively in that timespan?”

ADVISER VIEW

Minesh Patel, owner of London-based EA Financial Solutions, said: “Young people are extremely naïve about pensions. Some are even unaware that you cannot access the money until retirement age. Unless they are sophisticated investors, they don’t understand where the money is invested. They are collecting all these benefits from different employers, but [they] do not know what to do with them.”