While millennials may be considered the tech-savvy generation the same cannot be said when it comes to managing their finances
According to research from Aegon, nearly a quarter (23%) of respondents aged 18-34 were unaware of how much their employer was paying into their workplace pension. There seems to be a lack of guidance and encouragement as 51% of millennials felt their employers weren’t actively encouraging them to check their pension.
Although there is an abundance of information available regarding workplace pensions, over two-fifths (41%) of respondents admitted they didn’t know that they get tax relief on their workplace pension contributions and the majority (58%) believe that it is their employer’s responsibility to help them plan their retirement.
Kate Smith, head of pensions, Aegon comments:
“In simple terms, tax relief on pension contributions is the government topping up an individual’s pension contribution, and it’s effectively a reward for saving. This worrying lack of understanding means that young savers in the workplace might be missing out on some of the benefits a workplace pension can offer if they opt-out or fail to maximise their employer’s pension contribution. Every year that passes in which this young generation doesn’t take advantage of the benefits of tax relief or employer contributions is a year of potential free money and investment growth lost.”
“As the main route for employees to save for retirement, the workplace is the perfect place to encourage employees to engage with pensions. And the results of our research show that this would be warmly welcomed and needed by most.”
While millennials may lack knowledge when it comes to their workplace pension, they are still the generation more likely to pick their own investment funds. Nearly three-quarters (72%) of people with a workplace pension have chosen to invest their pension contributions in the scheme’s default fund. Millennials differ in that 30% were more likely to pick their own investment funds over the scheme default option compared to only 20% of 35 – 44-year-olds, 15% of 45 – 54-year-olds and 23% of 55 – 64-year-olds
Jonathan Watts-Lay, Director, WEALTH at work, a leading provider of financial education, guidance and advice in the workplace, comments: “By introducing financial education into the workplace across all career stages, including for younger employees who are just getting started out, more people will be able to learn the basic principles of money management which will benefit them not only throughout their careers, but also later in life.
The pension is of course a valuable workplace savings vehicle but employers also need to think about the bigger picture as younger employees will have different savings priorities, such as buying a first home. For example, providing a range of saving vehicles such as a Lifetime ISA (a great option for those who want to save for a deposit on their first home due to the guaranteed bonus), ISAs and share schemes alongside a pension, can help employees with their short, medium and long term savings goals.
Financial education is then useful to help employees understand their company’s benefits programme and how it can maximise the total value of their wealth.”
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