As a responsible employer, ensuring your employees understand the value of their workplace pension scheme is an important aspect to HR due-diligence.
While older employees may push for you to match their increased contributions – an entirely different challenge in itself – young employees, who want their money now and to worry about their future later, may be tempted to opt-out.
To illustrate to the younger generation what a financial future without a workplace pension scheme would be like, impaticial pensions advisors, Profile Pensions, conducted a study that compares current millennial spend with the amount they will receive on the state pension.
The data, revealing a 142% gap between the spend and the state pension, can be used to explicitly explain to your employees the consequences of opting out.
Comparisons based on various pension pot sizes:
|Pension Pot Options:||Young Professional Total Monthly Spend: £1,700|
|Monthly State Pension: £731||59% less than young professional spend|
|Monthly Modest Pension: £1,200||32% less than young professional spend|
|Monthly Comfortable Pension: £2,371||34% more than young professional spend|
To provide further support to young employees who think that contributing now is to difficult within their current expenses, Michelle Gribbin, Chief Investment Officer at Profile Pensions offers these key tips.
Tips for Young Employees to Save for Pensions
- Take advantage of your company’s workplace pension scheme: Due to auto enrolment, you’ll be saving a minimum of 8% of your salary per month towards retirement. Comprised of a 5% deduction from your pay and a 3% employer contribution, the 3% employer contribution is money you will not otherwise receive that is added to your pension pot for your future self. The 5% you contribute provides added tax relief.
- Be proactive and make sure your scheme is best for you: As with many things, the default option may not be what’s best for you. Looking at your pension plan and assessing if it is measured in line with your attitude towards risk could increase contributions without an extra penny from your pocket.
- Cook for yourself, rather than take away: It’s a 101 saving tip, but choosing to cook for yourself can be one of the easiest ways to cut costs. The average amount spent on groceries and takeaways together equals over £300 a month, by trading Deliveroo for Tesco, you could be putting aside as much as £110 a month towards your pension.
- Enjoy nights out but be savvy about them: The average monthly amount spent on nights out is equal to 32% of the full state pension. While enjoying yourself while you’re young is important, spending less while you’re out, considering cheaper options or just staying in a little more can cut costs in half and save you £100 a month to go towards your private pension pot.
The full research is available on the Profile Pensions website.