Young people less likely to opt out, report confirms

According to Scottish Widows' ninth annual pensions report, 37 per cent of those aged between 22 and 29 expect to stay in schemes when auto-enrolled. 

This is compared with 27 per cent of those aged 50-59. The 17 per cent of young people intending to opt out is “slightly below average”, the report found.

Reports from the largest employers have revealed lower-than-expected rates. Earlier this year the National Association of Pension Funds said that young people opting in was the most interesting aspect of auto-enrolment so far.

“The numbers have been so low that it is hard to identify specific groups where opt-outs are higher or lower,” said Martin Freeman, director at JLT Benefit Solutions.

However, in industries such as retail, where employees are predominately young, opt-out rates have been very low, added Freeman.

“They know the earlier they start, the better it will be for them,” he said.

It could also be down to the effort that has gone into communicating auto-enrolment, with some employers telling staff that contributing to a pension is as “natural” as contributing to national insurance, Freeman added.

Auto-enrolment contributions start out requiring only 0.8 per cent of workers' qualifying earnings. Young people with low contributions, and sometimes variable pay, could have failed to notice the money leaving their payslips.

But Andy Chelseldine, principal at consultancy LCP, said: “Younger people are more engaged with saving than we give them credit for.
“[They are] taking it as read that if someone is pushing them into a scheme it is the right thing to do.”

In May, the NAPF reported its members’ feedback suggested opt-ins were much higher than expected among employees below the age of 22, at which point they become eligible to be auto-enrolled.

It put this down to employees saving while they could afford to, before the onset of other financial burdens such as mortgages.