Young workers embrace pensions move
Young workers are leading the way in the Government's pension savings revolution, with people aged under 30 more likely to embrace automatic enrolment than any other age group, figures released by a major retirement scheme show.
Just one in every 20 workers aged between 22 and 29 is choosing to opt out of the Government's automatic enrolment scheme, compared with a much higher rate of one in four people aged between 60 and 65 who are shunning the initiative, according to data from workplace pension scheme Nest.
Some 95% of 22 to 29-year-olds are opting to remain in the workplace pension they have been placed into by their employer as the scheme rolls out, with just 5% in the age group opting out, according to Nest, which took the research from its 1.5 million members.
Nest found a "generational split", with the highest opt-out rates taking place among older workers.
About 28% of people aged between 60 and 65 are opting out, with 13% of 50 to 59-year-olds choosing to leave their scheme.
This week marks two years since automatic enrolment started, with the scheme kicking off on October 1 2012 when the largest employers started to automatically place their employees into a workplace pension amid concerns that people are living for longer but failing to put enough cash aside for their old age.
It has been estimated that one in three children born today will live to see their 100th birthday.
Employees can only decide to opt out of a pension scheme after they have been placed into it.
Nest said its findings suggest a "dramatic shift" in young people's attitudes towards retirement saving.
Before auto enrolment started, a quarter (25%) of people aged under 30 had said they were planning to opt out.
Nest (National Employment Savings Trust) was set up as a not-for-profit option to fill gaps in the existing market as the Government rolls out the programme, which will eventually see about 10 million workers placed into retirement schemes.
Nest chief executive Tim Jones said: "We know that younger workers often think they are too young to start saving in a pension but so far this hasn't played out.
"Workers under 30 are the most likely to stay in their automatic enrolment scheme, with 95% staying in.
"These participation figures suggest that the policy is working, and particularly with the younger generations."
Mr Jones added that Government reforms to give people more control over their pension savings pots later in life, including being able to cash in their pot if they wish, should help to make the benefits of retirement saving a "no-brainer" for older workers.
These reforms, which will be fully implemented from next spring, will mean that people no longer feel forced to use their retirement pot to buy a lifetime income called an annuity.
Mr Jones said: "Older workers who stay enrolled get money from their employer and tax relief.
"This can double the value of their own contributions, which for many should be a no-brainer, especially compared to other vehicles."
Employers have to automatically enrol workers who are not already in a qualifying workplace pension scheme, are at least 22 years old and below state pension age, earn more than £10,000 a year and ordinarily work in the UK.
Some 4.5 million people have been automatically enrolled so far. An estimated eight to nine million people will eventually be newly saving for their old age or saving more as the scheme is fully implemented .
Pensions expert Ros Altmann, who was recently appointed by the Government as business champion for older workers, said: "I certainly think it is encouraging that many younger workers are remaining in their employer pension scheme.
"It is of great concern, though, that so many older people are opting to leave.
"In light of the new pension freedoms, older workers are turning down free money and perhaps don't realise that, although it's best to start saving early, it's never too late and auto enrolment is a very attractive proposition for most people."
So far, a much higher than expected rate of around nine in 10 people are staying in their pension scheme rather than opting out after they have been automatically enrolled.
But the employers taking part so far have been larger companies, which tend to have more experience of pensions and communicating their benefits.
Pensions Minister Steve Webb said: "It's clear that the earlier people start saving for a pension, the more comfortable they'll be in retirement.
"That's why automatic enrolment, which will see around nine million saving for the first time or saving more, is so important.
"These very encouraging figures show the coalition Government's policies are turning around the previous long-term decline in pension saving that we saw over many years."
Thousands of small employers with fewer than 50 workers will see their automatic enrolment duties come into effect from June next year, eventually affecting everything from corner shops to farms, builders and pubs.
The Pensions Regulator has started writing to smaller employees about what they will need to do to get set up for auto enrolment.
It has been urging employers to find out when they need to be ready to meet their staging date, which is the date when their duties under auto enrolment go live.
Employers can find out their staging date by going on to the regulator's website - www.thepensionsregulator.gov.uk.
Here are the automatic enrolment opt-out rates so far by age group, according to Nest's data:
:: 22-29, 5.0%
:: 30-39, 6.1%
:: 40-49, 7.4%
:: 50-59, 12.8%
:: 60-65, 28.4%