Understand
Why Gen Z and millennials are opting out of workplace pensions amid cost-of-living pressures
Overview
A growing number of younger workers in the UK, including Gen Z and millennials, are choosing to opt out of workplace pensions due to immediate financial pressures such as high rent, student loans, and the cost of living. Government and industry experts warn that this trend risks leaving future retirees with lower private pension incomes, missing out on employer contributions and decades of compound interest.
Key points
- Department for Work and Pensions data shows that 11.5% of eligible 22 to 29-year-olds who recently started a job opted out of their pensions in late 2023, up from 6.6% in 2020.
- Young workers cite immediate necessities like rent, student loans, caring for family, and saving for a first home as reasons for needing short-term cash over long-term pension savings.
- Financial advisors warn that opting out means losing valuable employer contributions and missing out on significant compound growth over a 30-to-40-year career.
- While around 22.6 million people in the UK remain in automatic enrolment schemes, approximately 2.5 million are not paying into one.