New stats reveal that Generation X account for 38% of all UK personal pension contributions in 2018/19. This is the highest proportion of any other age group.
Generation X, those aged between 45 and 55, contributed £3.53bn to their personal pensions in the most recent year. The contributions of 2.1 million members of Generation X far exceeded the £2.9bn contributed by Millennials, despite the latter totalling 3.5 million workers.
As Generation X workers move closer towards retirement, it’s expected they will be further accelerating payments into their pensions. These workers are also likely to be at the peak of their earnings and have more money to contribute.
By increasing pension contributions ahead of retirement, this is an effective way of avoiding any shortfalls but better still start your pension savings early and benefit from compound growth of those savings.
Millennials have now surpassed baby boomers, making up a higher percentage of personal pension contributions (31%), compared to 28% for baby boomers.
The amount contributed by Generation Z (those aged between nine and 24) to their personal pensions almost doubled in the latest year, to £190m in 2018/19.
Even if retirement may seem like a lifetime away for Generation Z and Millennials, it’s important to make regular contributions early on in their career. This would help take advantage of the compounding of investments and avoid the pressure of having to catch up much later in life.
During the pandemic, 16% of employees reduced their pension contributions and 7% stopped altogether.
If individuals continue to limit their contributions this could have a severe impact on their retirement plans. Some may be forced to work considerably longer than they had planned or face financial struggles in retirement.
Given that working life can be extremely uncertain, as shown by the last 12 months, individuals must make sure that they contribute regularly to their pensions when they can. If not, then unforeseen events such as the pandemic, may force people to cut their payments, leading to a shortfall in the future.
Another advantage to making regular contributions means that individuals can take advantage of the Government tax reliefs, whilst they are still generous.
For those who are uncertain as to how to make a financial plan for retirement that works for them, speak to us for expert advice.