Pensions - Articles - Workplace pensions must evolve for younger workers

Employers believe younger workers are facing significantly different retirement challenges to previous generations, as immediate financial pressures and changing career patterns make long-term saving harder, according to new research¹ from People’s Pension².

 

Almost half (45%) of SME employers say younger workers under 25 are unable to prioritise long-term saving because of immediate financial pressures. More than a third (37%) believe younger employees increasingly see a comfortable retirement as unrealistic, while 36% say they are less engaged with pensions than previous generations.

 

Employers also point to changes in the way younger people enter and move through the workforce. Almost a third (32%) say delayed career progression and lower earnings are reducing opportunities to build retirement savings early, while 27% believe more fragmented and less secure careers are making long-term pension saving harder. Just 4% say younger workers do not face significantly different retirement challenges.

 

The findings come as employers question whether the pensions industry is keeping pace with those changes. More than a third (36%) say the industry has not adapted quickly enough to changing workforce expectations, while 28% believe adapting workplace pensions to better suit fragmented or less traditional careers will help define the next major phase of the system.

 

Employers also see opportunities to improve future retirement outcomes. A third (33%) believe better financial education from a younger age could have the greatest impact, while 29% point to stronger government incentives to save. More than a quarter (26%) say making retirement options simpler to navigate could transform outcomes for future workplace pension savers.

 

These findings come during Talk Money Week (2-6 November), which focuses on the theme ‘It All Counts’, encouraging people to recognise the value of small, manageable steps towards improving their financial wellbeing. Against a backdrop of financial pressures making long-term saving difficult for younger workers, the findings highlight the importance of helping people understand and engage with their pensions from an early age, even when increasing contributions may not be affordable.

 

Stuart Reid, Distribution Director at People’s Partnership, said: “Younger people are entering the workforce in a very different financial environment to previous generations. Many are balancing immediate pressures with the need to save for the long term, while the traditional idea of a steady career and a predictable path towards retirement is becoming less relevant for some.

 

“We can’t expect younger workers to simply fit into a workplace pension system built around very different career paths. The system must evolve alongside them, making it easier for people to understand the value of saving and stay connected to their financial world as their jobs, earnings and circumstances change.

 

“Talk Money Week is a reminder that even small steps and conversations about money can make a difference. For younger workers who may not be in a position to save more, simply understanding what they and their employer are contributing, or taking the time to review their pension savings, can be a valuable starting point. Employers and providers have an important role to play in making these conversations easier and giving people the confidence and support to make informed decisions about their financial future.”