Younger savers still not putting away enough for retirement

The government has so far ignored a commitment to address the problem of multi-jobbers by taking a person’s full income into account for auto-enrolment

THE effects of the Covid pandemic and the three consequent lockdown periods have had a devastating effect on the ability of several vulnerable social groups to prepare for retirement.

In last week's column we have already zoomed in on the problems for women, and younger women in particular, with regard to pension saving.

In fact, we reported that a woman, who is much more likely than a man to be in part-time work, would in theory have to work until she was 100, in order to build the same level of pension as her male counterpart.

This week we're looking in general at the problems for younger savers, as the previous benefits of auto-enrolment appear to be losing momentum after the introduction of auto-enrolment on October 1 2012.

The thinking behind auto-enrolment was to take our ‘pensions apathy' – that tendency we have never to get around to joining a pension scheme – and turning it to our advantage.

Now we would (in 2012), if over 22 and earning more than £10,000 a year, be automatically placed in the pension scheme, but with an option to opt back out again. Due to our ‘pensions apathy', what we would now never get around to would be opting out. So today we have 10 million who are busily saving for their retirement, while they work.

However, Scottish Widows (SW) have done some nifty research this year, and reveal that of younger savers in the 22-29 age group, less than half (49 per cent) are saving adequately for retirement, and that's before the effects of the lockdowns fully kick in.

Let's not forget that only ‘eligible' workers are auto-enrolled. If, for example, you are a ‘multi-jobber' with several part-time jobs, but none of them pay £10,000, or if you are under 22, then you won't be auto-enrolled anywhere.

SW also did a bit of research during lockdown which showed that one in four people are already concerned about paying for essentials because of the outbreak, and 3.7 million have cut or ended their pension saving as a result. It's a real mess.

They also found that, in comparison to the average for the total population, people from ethnic minority backgrounds are twice as likely to have cut down or stopped saving. We're back to ‘multi-jobbers' syndrome' here – nearly one in five ethnic people (18 per cent) work multiple jobs, much higher than the overall figure of 13 per cent.

The government has so far ignored its previous commitment to address the problems of multi-jobbers by taking a person's full income into account for auto-enrolment; they have also failed to reduce the starting age from 22 to 18.

Don't even get me started on the government's treatment of the self-employed and those renting their home, who are the other sections of the population classed as financially vulnerable, especially in the past year.

To look at the bigger picture, if younger workers entering their 20s, plus the self-employed, plus part-time workers, are being unfairly disadvantaged in this way, we are storing up massive problems for the future.

Overall, SW say that two people in five in the UK run a real risk of facing an impoverished old age, and this would have been the case anyway due to inequalities in the pensions system, even if Covid hadn't come along to make things worse.

Under the circumstances, might a little planning for your future be advisable? Give us a call today.

:: Michael Kennedy and Shaun Doherty are independent financial advisers and pensions specialists and can be contacted on 028 71886005. Further information on Facebook at Kennedy Independent Financial Advice Ltd or at

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