As policymakers examine long-term savings levels, two pieces of research highlight a gap between how the industry views younger workers and what employees say would encourage them to contribute more.
Pension professionals believe Generation Z’s lack of engagement with retirement saving is largely driven by competing priorities and affordability pressures, according to polling by the Society of Pension Professionals (SPP).
However, the findings reflect the views of the pensions industry itself rather than speaking to younger savers.
“The industry needs to accurately identify any barriers to taking an interest in pensions before it can take steps to address them and encourage greater saving.”
Sophia Singleton, Society of Pension Professionals
At the SPP’s first event in a new series on pensions adequacy, more than 180 pension professionals were asked what they believe is the biggest barrier limiting Gen Z’s interest in pensions. Some 39% chose “not a priority”, while 29% cited affordability. A further 15% pointed to a lack of understanding or complexity.
Just 3% selected lack of trust, and 2% chose better alternatives.
Sophia Singleton, president of the SPP, said: “[The] industry needs to accurately identify any barriers to taking an interest in pensions before it can take steps to address them and encourage greater saving.
“The SPP’s industry polling reveals that more than two-thirds of pension professionals believe that the biggest barrier to Generation Z having a greater interest in pensions is that it’s simply not a priority or that it’s unaffordable.”
The polling comes against a backdrop of ongoing adequacy concerns, with around 15 million people estimated to be undersaving for retirement and the government establishing a new Pensions Commission to consider long-term savings levels. The commission is focusing in particular on Millennials, those expected to retire by 2050, amid fears that this cohort could be at risk of falling behind.
Employees would save more – if employers match
Separate research from workplace pension provider Penfold suggests that willingness to contribute more may already exist, provided employers share the burden.
Its ‘Retirement Reality Check’ report, based on surveys of 2,000 UK employees and 500 small and medium-sized businesses, found that 53% of employees would increase their pension contributions if their employer offered matching contributions.
However, just 14% of SMEs currently offer matching contributions above the statutory minimum, and 47% of employees remain at the minimum contribution level.
“Doing the minimum is no longer good enough. Sticking to bare minimum contributions risks losing talent.”
Chris Eastwood, Penfold
The research also indicates that pensions play a significant role in retention. Nine in 10 employees say their pension influences whether they stay in a role, while only 4% of businesses report that they genuinely cannot afford to contribute more than the minimum. This suggests that companies’ contribution strategy may be less constrained by cost than assumed, and more a question of prioritisation.
Chris Eastwood, CEO and co-founder of Penfold, said: “Employees are ready and willing to save more for their future; employers just aren’t meeting them halfway. The ambitions to save are there, but employees can’t do it alone. Similarly, employers are missing opportunities when it comes to supporting their staff with the benefits they currently offer across their workplace.”
He added: “With 95% of employees saying the typical 3% to 4% employer contribution isn’t enough to keep them, the message is unambiguous: doing the minimum is no longer good enough. Sticking to bare minimum contributions risks losing talent.”
