Research highlights prevalence of young people opting out of pension contributions

Nearly one in five (17 per cent) Britons in Generation Z (those aged 18-24) are opting out of all pension contributions, according to research from money.co.uk.

The financial services comparison site found that opt out rates declined as savers got older, with 15 per cent of Millennials (25 to 40 year olds) and 10 per cent of Generation X (41 to 56 year olds) completely opting out of pension contributions.

Almost a third (32 per cent) of savers in Generation Z instead chose to focus on saving for a home, 31 per cent were saving for material goods and 28 per cent were saving for a dream holiday.

A quarter of the Generation Z age cohort did not believe a savings target of £22,500 a year was achievable, compared to 21 per cent of Millennials and 26 per cent of Generation Xers.

Additionally, 23 per cent of Generation Zers and Millenials did not know who much they currently contribute, with this proportion increasing to 26 per cent for those in Generation Z.

However there was evidence of some younger people taking an interest in pension saving, with 23 per cent of savers in Generation Z making additional contributions on top of auto-enrolment.

This compares to 17 per cent of Millennials and 25 per cent of Generation Xers.

Commenting on the findings, money.co.uk personal finance editor, James Andrew, said: “Everyone’s financial situation is different, but the earlier you start paying into a pension, the better result you’ll get at retirement.
 
“That’s because if you don’t start saving until you're older, you’ll need to put far more away to catch up - as the money has less time to grow.
 
“Once you pass the automatic enrolment earnings threshold, 5 per cent of your pre-tax salary goes straight into your pension to be topped up by your employer, unless you actively opt out or your firm has a more generous scheme in place.
 
“But while that might make some younger workers feel secure, remember that every extra pound you save a month in your 20s and 30s can be worth hundreds by the time you retire - but the later you leave it the less time that money has to grow.
 
“When it comes to staying on top of your work or private pension, your provider will send you a statement each year that details the funds you have built up - along with a projection of what this will be worth at your nominated retirement age.”

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