London – 17 November 2004 – More than half of UK employees aged 18 to 29 surveyed (53.3%) are failing to save adequately for their retirement, according to the latest research from Aon Consulting, a leading pensions, benefits and HR consulting firm.

The study¹, which surveyed 1,500 individuals throughout the UK, found that less than half (46.7%) of respondents aged between 18 to 29 years in the UK participate in their organisation’s pension scheme.   Despite this, two in three (65.4%) believe that their income – from occupational and state pensions – in retirement will be sufficient to guarantee them a decent standard of living.  This faith in the adequacy of their pension income is significantly higher than those approaching retirement age, which stands at 58.5% of those aged 60 or more.  Furthermore, none of those aged 18 to 29 is considering accepting lower retirement income. 

Overall, the reasons given for non-participation appear to reflect a lack of awareness of the importance of retirement savings, or simple inertia, with:

• One in five (19.6%) feeling they are too young to worry about a pension scheme, this reason was not cited by a single respondent aged 30 or over;
• Some 16.5% saying they will not be staying at the company long enough to enroll, and as many more say they have not yet got around to it (an excuse more popular with women than men, at 20% and 15.2% respectively);
• Almost twice as many men (15.2%) than women (8.9%) believe they can obtain a better pension scheme independently and a small proportion of 18 to 29 year olds  (7.2%) believe this to be the case; 
         
• Only one fifth (22.7%) of 18 to 29 year olds who do not participate in their company pension are ineligible to do so (with women slightly more likely to be ineligible than men);
• 6.2% said they could not afford the contributions.

Commenting on the latest research findings, Chris Squirrell, Consultant and Actuary at Aon Consulting said:  “Despite the fact that the structure of money purchase plans² inevitably leads to a less predictable retirement income, younger people are more likely to believe that their pension income will be adequate, and they are the least inclined, of all age groups surveyed, to make pensions contributions.  This is a dangerous cocktail of high expectation and unfounded faith in the UK pensions system.

“It is understandable that, early in a career, when salaries are lower and retirement is just a distant concept, it may be difficult to put money aside. However retirement saving is much more efficient when it happens earlier.

“Going forward, the onus will be on individual members to ensure that their pension is sufficient in retirement.  This message does not appear to be reaching the 18 to 29 year olds.  A good standard of living in retirement is very expensive and other assets are unlikely to be sufficient on their own; the current trend amongst some groups to bank on property to provide for retirement will just not be enough.  Any good retirement savings strategy will include a pensions scheme.                                                                                                                          

“Employers have a role to play in encouraging younger employees to save via a relatively straightforward communications programme, which could dramatically raise awareness, improve take-up, and thereby create a more committed workforce.  Both parties can gain from the provision of occupational pension scheme - our research shows that companies which provide pensions have a more committed workforce than those who do not³.” 

Other key findings relating to 18 to 29 year olds includes: nearly two thirds (63.6%) see a contribution from their employer as very important or critical; over half (57.8%) rank predictability of retirement income as very important or critical; one in three (30%) state they intend to make additional pension contributions; over one in four (28.5%) see predictability of retirement age as very important or critical.


Note to Editors:

1. Conducted in August 2004, the Pensions @Work survey collated responses from 1,500 individuals from across the UK. Each respondent is employed in an organisation with 20 or more employees. The survey forms part of Aon Consulting’s long-standing @Work research, which annually measures UK workforce commitment.  Please ring the following number: 020 8970 4475 for a copy of the report.

2.   As many as 31% of 18 to 29 year olds, or 38.1% of private sector employees surveyed were members of a Defined Contribution (DC) or money purchase schemes.  Membership of these schemes is set to rise as UK companies continue to move away from Defined Benefit (DB) pension provision.

3. Respondents whose organizations provide a pension scheme have a WC™ of 92.5, compared to 83.4 for those that do not – a significant difference. 

About Aon Consulting

Aon Consulting is a leading human capital consultancy, helping organisations of every size to attract and keep the employees they need. We advise on all aspects of employment, including health-related insurance and risk; employee compensation and pensions; human resource strategy planning; job design and change management; and staff assessment and legal issues. Aon Consulting is a division of Aon, the UK’s largest insurance broker and provider of risk management services, a major force in reinsurance and the UK human capital consulting market.

Aon Consulting Limited is authorised and regulated by the Financial Services Authority.



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