New research has shown that whilst many more people are saving for retirement, younger workers are still lagging behind.
The research from Scottish Widows has shown that just two years in, Automatic Enrolment looks to be succeeding in helping more people save for retirement. According to the report:
- 50% of people earning between £10,000 and £30,000 a year are now saving adequately for retirement, up from 34% in 2012
- The number of people aged between 30 and 49 saving enough for retirement has risen to 49%, up from 42% the year before
However, the report reveals a lack of awareness about the importance of saving for retirement amongst younger generations. Just 21% of 22 to 29 year olds believe that the time to start saving for retirement is before the age of 25.
Encouraging younger workers to save
Whether you have already complied with the Automatic Enrolment rules, or you have not yet reached your Staging Date, here are five reasons why your younger workers can’t afford to miss out:
#1: Retire sooner or on more money
It doesn’t take Einstein to work out that the sooner your employees start to save for retirement, the sooner they will be able to stop work or the higher their income in retirement will be.
Scottish Widows has calculated that starting to save five years earlier could increase a worker’s retirement income by £725 per year, whilst starting 10 years sooner adds an extra £1,500.
They probably won’t be inclined to start a pension on their own; Automatic Enrolment should therefore give them a nudge in the right direction.
#2: Giving up ‘free’ money
It’s unusual for anyone to pay enough into their pension, so opting out of Automatic Enrolment will mean your employees effectively turning down ‘free’ money, missing out on your contributions and tax-relief on their.
#3: A retirement safety net
Most people won’t be able to retire on the State Pension alone. Automatic Enrolment therefore provides an invaluable opportunity for younger workers to build up a meaningful pot of money for use when they retire.
#4: Flexibility in retirement
Many people have been put off pensions due to the lack of flexibility when they finally finished work.
Following the Budget this has all changed, with limits on the amount available each year from a pension scrapped.
What’s more, the charges on Automatic Enrolment schemes will be capped at 0.75% removing another popular excuse for not paying in to a pension.
#5: Better than other options
However, both potentially lose out to Automatic Enrolment. An ISA won’t benefit from tax-relief or employer contributions, whilst buy to let requires a large lump sum of capital.Many people have chosen to save for retirement in alternative ways; ISAs (Individual Savings Accounts) and buy to let being two popular options.
Help your younger workersFor most people Automatic Enrolment is the ideal place to start saving for retirement, with other options being used in addition when spare cash allows.
As an employer it’s crucial you help your younger workers understand the importance of starting to plan for retirement early, as well as not opting out of Automatic Enrolment.
One particularly effective way of doing this is through on-site workshops, where the benefits of Automatic Enrolment can be explained.
We’re highly experienced at delivering such workshops; if you would like to learn more about how we can help feel free to contact us on 0115 933 8433 or email firstname.lastname@example.org