It’s a simple fact that millennial workers are not paying as much into their pension savings as they should be. Even though more millennials are actually paying contributions into their pensions, they are doing so at a much lower rate. This is startling when looking at other generations contributions, with Gen Z almost doubling their pension wealth over the same period. The question of why millennials are giving less priority to their pensions than they should is largely down to confusion. A basic misunderstanding of how pensions work and how they can benefit you right now has lead many millennials to dismiss the importance of saving for retirement.
Pensions are in place so that you have an easy way to save for your retirement. No matter how you see yourself spending your later years away from the toil of work, having a pension can make those years much easier. The problem is that just over many millennials have admitted that they are confused by pensions and how they work. They aren’t the only ones either. Even the over-55s have said that they would prefer there to be more available resources about their retirement savings, so that they are able to make more informed decisions about them. That’s why Portafina have collected all of their pension resources and guides in one place, so that all age groups have a simple way of finding out more.
Making contributions into your retirement fund will obviously benefit you in the long term, but there are many short-term benefits as well. Pensions can offer many forms of tax relief and tax breaks, and whenever you make a contribution to your pension the government then reduces your income tax payments. Although there is a limit on this, that limit is still quite substantial. As a result, this one form of tax relief alone could lead to a higher saving amount. It is areas such as this that are the most generally confusing for millennials.
If you are paying into a workplace pension, then your employer is also making payments for your retirement. Currently, you will be paying a minimum of 3% of your wages into your workplace pension. That means that your employer will be contributing 2%. This combined total can quickly add up, and even more so in April 2019 when the overall contributions will be 8%. This is one of the main reasons why workplace pension schemes are so valuable.
Taxes and Savings
All of the money that you put into your pension is not taxable, which makes it far superior to standard savings accounts. There are also more tax breaks available for pensions, and when combined with compound interest your savings could actually accumulate in a type of snowball effect, meaning that you save a lot more money for your retirement.
It’s no wonder that millennials are not focusing on their retirement. High rents and the difficulties of getting on the property ladder are reason enough to cause a drop in concern over retirement savings. However, despite the high cost of living, pensions remain an invaluable resource. If you’d like to know more, Portafina Discovery can be found on Twitter by following @Portafina_UK, and Portafina can also be found on YouTube, LinkedIn, and Facebook, and can provide you with all of the facts and resources that will help you get more from your pension.