Pension Freedom  

Millennials oblivious to state pension and freedoms

Millennials oblivious to state pension and freedoms

Millennials are largely unaware of their entitlements to a state pension and to the introduction of the pension freedoms, according to a poll by Aviva.

Research from Aviva found that four out of five people aged less than 35 in the UK are not confident they will receive the state pension once they retire, and just one in five of those aware of the state pension know how much they would receive.

Half of millennials that participated in the research, which surveyed 1,316 consumers aged 20 to 55, were unaware of the pension freedoms, but two-third believed that the changes would make pensions savings more attractive once the freedoms were explained.

There was also confusion around when the state pension could be accessed, as two thirds believed that they could begin taking money before the age of 68 – the predicted retirement age for those aged less than 35.

This misunderstanding could be worsened by the recent Cridland Review, which proposed a further acceleration in the state pension age.

In his long-awaited final report, released last month, more than a year after the review was announced, John Cridland recommended raising the state pension age to 68 between 2037 and 2039.

After that, he recommended allowing it to increase in line with longevity expectations, but by no more than one year every decade. 

That would mean the state pension age could reach 70 by as early as 2057 - affecting anyone born after 1987.

Alistair McQueen, head of savings and retirement at Aviva, said until more young people are aware of recent pensions changes, the UK is yet to reap the full benefit of the “huge amount of time, money, and effort” spent modernising the country’s pension system.

“As many as 14 million young savers today understandably see retirement as tomorrow’s problem.

"Yet the retirement challenges facing today’s under-35s are arguably greater than those faced by any recent generation. We need to reframe how we see this challenge and position it as a challenge for the young, not just the old.”

Mr McQueen encouraged providers to focus more on technology and the internet as ways of communicating the value of pensions to millennials, and cited MyAviva and the Pensions Dashboard as steps in the right direction.

“We need to encourage action amongst today’s young and ensure all concerned understand what lies ahead. If this greater understanding is translated into greater action there could be as many as 10 million more active young savers in coming years.

“With greater understanding, I am confident the young will be better placed to take control of their futures and will seize this responsibility.”

Claire Walsh, chartered financial planner at Aspect 8, said that pensions are often not a priority for young people as retirement feels a long way away, and agreed that most young people are wary of whether they will receive a state pension.

“Young people don’t like to rely on things and the ones who are thinking about it are tuned into the need to plan for oneself. I imagine this is a big shift from previous generations where this and final salary pensions were taken for granted,” Ms Walsh said.