Pensions time bomb looms for under-30s, warns Prudential

Pensions time bomb looms for under-30s, warns Prudential

More than half of under-30s are without pensions savings or only make the minimum contribution to their pensions, according to research by Prudential. 

The latest figures from the Department for Work and Pensions show that three-quarters of the UK's employees are participating in auto enrolment pensions schemes, with a total of 79 per cent of eligible workers having contributed to a workplace pension in three of the last four years. 

However, the insurer said that encouraging those under 30 to save enough for their retirement is a "challenge". 

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Many savers under the age of 30 surveyed said they were only able to make the minimum contributions due to more pressing financial commitments. They also complained that they were put off pension savings by complicated pension rules. 

Prudential's study tracking UK workers aged 21 to 65 found that 53 per cent of under 30s only make the minimum pension contributions required by their workplace pension schemes or are without a pension altogether. 

Although a quarter of under 30s said they can't afford to pay into a workplace pension scheme, 33 per cent also said they find pension rules confusing, while more than half complained that their employer had not explained the workplace schemes clearly enough. 

Researchers also found that the proportion of those making only the minimum contributions decreases as employees age - from 40 per cent for 21 to 30 year olds, to 30 per cent of 31 to 40 year olds, and from 22 per cent of those aged 41 to 50 to 16 per cent of those aged 51 to 65. 

“Pension saving is for the long-term and the contributions made earlier in your working life are obviously the ones that will have the best chance to grow and make a significant difference to your retirement," said Stan Russell, a retirement income expert at Prudential.

"With this in mind, it is worrying that our research reveals that large numbers of younger workers are disengaged from providing for their own retirement.

“As life expectancy continues to increase and retirements get longer, it is inevitable that the responsibility for funding pensions will shift further and further away from governments and employers and more on to individuals.

"People who are members of workplace pension schemes benefit from employer contributions on top of their own and should try to save as much as possible from as early as possible in their working lives."