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Thirty somethings outpace 40 year olds in retirement savings race
Workers in their 30s contribute more to their pensions and are more engaged with their retirement savings than those in their 40s, research reveals.
Despite being further from retirement, 30 somethings put a higher emphasis on their retirement planning, according to the study by Fidelity Worldwide Investment, with 76 per cent actively thinking about retirement. This figure falls to 69 per cent for those in their 40s.
Among those holding any sort of pension product, participation is higher for workers in their 30s than those in their 40s, with only 8 per cent of those in their 30s not currently contributing anything into a pension versus 18 per cent for those in their 40s. Furthermore, as many as 81 per cent of younger workers contribute to a workplace pension compared to 72 per cent of 40 somethings.
Both groups are unsure from where the majority of their retirement income will stem, with 24 per cent of 30 somethings and 25 per cent of 40 somethings saying they simply don’t know. However, those in their 30s seem to view this as an incentive to save and engage, while older workers seem to experience more inertia.
While 72 per cent of pension holders in their 40s contribute up to 5 per cent or more of their monthly salary to their pension, 83 per cent of younger workers do so. In addition, 22 per cent of older workers register lower engagement, and are not able to say how much they make in pension contributions each month, suggesting they have no clear view on how much they have accumulated. This compares to just 12 per cent for those in their 30s.
The table below illustrates the age group disparity:
| Contribution of gross monthly salary | 30-39 | 40-49 |
| 0% | 6% | 6% |
| Up to 5% | 42% | 36% |
| Up to 10% | 26% | 22% |
| Up to 15% | 7% | 10% |
| Up to 20% | 6% | 2% |
| More than 20% | 2% | 1% |
| Don’t know/not sure | 12% | 22% |
“You would normally think that people who are closer to retirement would automatically be more engaged with the issues however, our research has shown this is not the case,” said Richard Parkin, head of retirement at Fidelity Worldwide Investment.
“There are a variety of reasons why – people in their 40s may be facing greater financial and family commitments that divert their attention and it would be unfair to ignore the very real costs and demands that people face.
“Our research does however show a great success for what the auto-enrolment policy was aiming to achieve, namely an increase in participation in workplace pension saving. With people so unsure in both age groups about where they are going to get their retirement income, it’s clear that harnessing inertia from “do nothing, get nothing” to “do nothing, get something” has had a genuine impact with only 6% in each group saying they contribute nothing to a workplace pension.
“It is unfair to lecture people by simply saying “save more” however, research has shown that consistency of contributions is key to good retirement outcomes as opposed to more.”
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