4 tips for closing the generational pension savings gap
Alongside rising living costs, record-breaking inflation rates and increasing fuel prices, it’s a difficult time to increase young employees’ benefit engagement – especially if it will affect their monthly pay.
Research shows that 28% of young savers are opting out of pensions. High rental costs and deposits for home buying are among the top reasons given for this decision.
In fact, only 6% of 18-24 year olds are highly engaged with their pension plan and 82% of young savers are yet to work out how much they need for a comfortable retirement. Organisations need to provide a deeper level of financial education to younger employees that better explains the security a pension provides and why they should take advantage of their employer’s plan. Research found most 24 to 34-year-olds did not know what happens to pension savings, with 54% believing it is deposited in savings accounts and earning a fixed amount of interest.
The generational pension gap isn’t just affecting Gen Z - most Gen Xers (57%) (those born between 1965 and 1980) want to save more for retirement, but say they can’t straddle multiple financial pressures, volatile incomes and competing priorities. Low motivation to save and a lack of information about retirement savings are further barriers; 39% of Gen Xers don’t feel confident about planning for retirement and few understand basic rules of thumb about the levels of saving needed to achieve a good income in retirement.
In short, to close the generational pension gap, employees need to better understand the importance of money management and build the confidence to leverage their pension plan.
So what can you do?
1. Offer financial education
The World Economic Forum says the importance of saving for the future should be taught in schools and reinforced throughout people’s careers – those who start saving early are less likely to struggle financially in retirement.
When knowledge about finances are gained early in life, people are more likely to experience high rates of positive overall wellbeing later on. By providing younger employees with financial education that makes pensions management simple, you can help your people achieve what they want in life and give them the confidence to take control of their financial future.
2. A nudge in the right direction
When there’s something your people need to know, or a pension-related action they ought to take, make sure they are informed in the moment. By automatically notifying your employees of legislative changes you can help them prepare for the impact this might have on their finances.
3. Provide money management tools
By providing interactive tools, you can help your employees plan for the expected and the unexpected. If your people can clearly see the impact their pension scheme will have on both their monthly budget and future savings, they will be better prepared to plan.
4. Use data to understand the gaps
If your wellbeing and pension programmes are underpinned by technology, you can get data insights into the gaps in your employees’ financial knowledge and provide them with personalised information to help plug them. Ultimately, this will build their confidence and skills to invest, save and engage with their pension plans.
While we’ve discussed the generational pension gap, it’s important to remember that this issue doesn’t just affect young people; globally 58% of people say they don’t understand enough about pensions to save properly and only 28% believe they are on track for the retirement they want.
Now, more than ever, employers need to take the right steps to ensure the financial wellbeing of their workforce by providing financial education that better explains and promotes their pension schemes. In fact, those who feel supported by their employer, receiving a financial education benefit, are 27% more likely to feel prepared for retirement. How are you supporting younger employees to close the pension gap?
In partnership with Nudge
A leading financial wellbeing benefit using behavioural science & technology to help employees.
