Eight out of 10 under 30 year olds are paying into a pension, but they aren’t saving enough, says a major financial firm.
Although hundreds of thousands of under 30s are paying into workplace pensions, they are not committed to saving extra cash when minimum personal contributions are lifted next April.
And research by pension provider Scottish Widows revealed that the target income for a comfortable retirement is just over £23,000 a year.
But on current average payments into their pensions that include employer contributions, the under 30s are on track for retirement incomes of £15,200 including the state pension.
Pension saving falls short
Financial experts at the firm have calculated that the current 1% of salary pension contribution matched by employers will give an annual retirement income of £9,734 a year.
The contribution will rise to 8% in 2019, but this will still only give an annual pension of £14,047.
The firm also fears many will stop paying into pensions as other bills such as buying a home and raising a family start to bite into their incomes.
Just over half (53%) already say they cannot afford to save and face repaying average debts of £20,000 each. A third of under 30s have student loans to repay, while a fifth have credit card bills and 15% have other loans to settle.
Scottish Widows suggests a combined employee/employer contribution of 12% of salary is the starting point for retirement saving.
Auto-enrolment is not a silver bullet
The firm’s retirement expert Catherine Stewart said: “There is no doubt auto-enrolment has been a success in kick-starting the savings habit for millions – but it is not a silver bullet.
“Auto-enrolment may well be lulling people into a false sense of security that they are putting away enough for a comfortable retirement. For many, that is simply not the case, particularly given retirement is looking more expensive than ever. With one in every 12 private rental sector tenants now a pensioner, Generation Rent is headed for a more expensive retirement than previous generations.
“While retirement may feel like a long time away for those in their 20s, it’s really important they start to think about it as soon as possible. Using the right platforms, technology and content to engage young people in formats they appreciate is a critical first step. If we don’t get this right then it is far more difficult for them to reach their desired savings levels in their 30s and 40s.”