[Skip to content]

Sign up for our daily newsletter
The Actuary The magazine of the Institute & Faculty of Actuaries

Millennial pension wealth declines following auto-enrolment roll-out

Millennials have seen their total wealth saved towards retirement drop since the introduction of workplace pension auto-enrolment, according to analysis by Equiniti.

Drop in millennial pension wealth ©Shutterstock
Drop in millennial pension wealth ©Shutterstock

The firm said overall savings between 2010-2012 and 2014-2016 fell by £700m for workers aged 25-34, with millennials the only age group to see pension wealth decrease during the period.

At the same time, the proportion saving has risen by 19% – more than in any other age bracket – with Equiniti saying increased participation has diluted the amount people actually save.

It was found that the median pension pot for 25-34 year-olds stood at £9,400 in 2010-2010, but that this has nearly halved to £5,000, with minimum contributions thought to be hitting total savings.

“Passively following minimum contribution levels may not build up a pot big enough to secure desired income in retirement,” Equiniti propositions and solutions director, Chris Connelly, said

“Auto-enrolment has been a great success in improving the proportion of savers, however, it is crucial that those enrolled for the first time do not consider it job done.”

The research involved analysis of data from the Office for National Statistics, finding that total pension saving among millennials declined from £12.8bn in 2010-2012 to £12.1bn in 2014-16.

This is in sharp contrast to the pension wealth accumulated by 16-25 year-olds, which nearly doubled from just over £600m to £1.1bn during that time.

Mandatory minimum contribution levels to workplace pension saving were raised from 2% to 5% last week, with a further increase set to bump this up to 8% next year.

However, Connelly said employees cannot rely on auto-enrolment to provide them with a healthy pension, but believes digitalisation and education are improving saving trends among millennials.

“Increasingly, this is the generation that expects to deal on their own terms. They will require no encouragement to take up digital services from suppliers, but will require clear communication,” he continued.

“We must do more than just hope these savers will see the value of putting away money now to reap the benefits further down the line.”

Sign up to our free newsletter here and receive a weekly roundup of news concerning the actuarial profession