PI Partnership – Legal & General Investment Management
LEVELLING UP IN PENSIONS? YOUNGER WORKERS ARE PLAYING ON BUMPIER FIELDS
Rita Butler-Jones is co-head of defined contribution at Legal & General Investment Management
It’s almost 10 years since rules came into force to automatically enrol workers into workplace pension schemes. It was one of the most positive moves to help protect the financial security of older people since the introduction of pensions themselves. Yet, as we rightly celebrate the milestone, we need to acknowl- edge that there’s still a long way to go to tackle pension inequal- ities for groups such as workers under 22 years of age. For workers under 22, even getting started on their savings journey can seem like a step too far.
The main issue for people yet to celebrate their 22nd birthday is that they fall below the age threshold for auto-enrolment, which means that while some may be offered membership of a pension scheme by their employer from age 18, most are not. In our latest research, Legal & General looked at what’s happen- ing in terms of workplace pension provision from the perspec- tive of those who may be in a position to receive it¹. We found some troubling trends among women and younger workers who disproportionately make up the lowest paid group of workers.
Understanding the rules – knowledge is (pensions) power We found that around half (49%) of those under 22 knew that if you earned less than £10,000 a year, you do not qualify to be auto-enrolled into your employer’s workplace pension. However, 62% of young workers did not realise they could ask to be enrolled if they earned less than £6,240, while most under 22s (56%) were not aware that employers do not have to make contributions on the first £6,240 of their income. Once they know their entitlements, there is a significant appe- tite to join a pension. Overall, 29% of under 22s said that if they had known they could, they would have asked to join their workplace pension even if their employer did not contribute to it. And nearly 20% would have asked to join their workplace pension if they had known that their employer would make contributions. Both statistics suggest that better education by pension providers and employers would make a difference to pension savings choices by those under 22. Some of the people we interviewed were surprised to hear that the employer and government paid into workplace schemes, as they thought that all contributions came from their wage packet alone.
1) Research carried out in summer 2022 by Ignition House on behalf of Legal & General Investment Management (LGIM). The research sampled 5,259 people in the UK private sector workforce
22 November 2022 portfolio institutional roundtable: Defined contribution
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