The question of whether the millennial generation are paying enough into their retirement pensions has been answered, and the result is not a surprise. Despite the fact that more millennials than ever are now making pension contributions, the total amounts are much lower than they should be. Compare this to Generation Z, who have managed to almost double their pension wealth in recent years, and it’s clear that there are issues. The question of why millennials are not prioritising their retirement savings is largely answered by the fact that they don’t understand just what pensions are and how they can work for you.
It’s not just the millennial generation that are confused by pensions. Even the over-55s have said that they would prefer there to be more available information about their pension options, and made requests for more resources. That’s why Portafina have been compiling their collection of pension resources and guides to help confused UK residents more fully understand what pensions are, and how they can be of benefit. The fact remains that up to 53% of millennials have said that they are confused by pensions. They also stated that they would like employers to help explain their options and the whole pensions process.
The Pension Basics
There are many benefits that you can get from your pension contributions, and these can be beneficial in both the long and short-term. Pensions offer a level of tax relief, primarily due to the fact that when you make a contribution, the UK government then refunds your income tax payments. This can lead to significant savings, despite the cap on total amounts. Many workers just starting their careers are unaware that there are strict guidelines regarding who is required to be provided with a workplace pension. These mean that your own personal payments are added to by your employer, and that too can increase the total amount that you have to retire with.
Any money that you do put into your pension is not going to be taxed. This is a much-misunderstood fact that can yield some long-term benefits for your retirement. The more money that you pay into your scheme, the less total taxes you have to pay. That means your retirement will have a much more secure foundation. When combined with tax breaks, tax relief, and any other contributions that you make, this can lead to a snowball effect that can have a huge impact on your pension totals.
It’s not just confusion that is preventing millennials from investing in their futures. The high cost of living is also a major factor, and when full-time workers are struggling to save due to high rental obligations, then it’s clear that looking too far ahead is not a priority. When you’re struggling to get onto the property ladder, or even simply pay the bills, then your retirement can seem very far away. That’s why Portafina Discovery have gathered all of their resources in one place. Follow them on Twitter @Portafina_UK and LinkedIn for regular updates about the changing pension laws and the facts about how to get more from your pension right now.
If you’re one of the millions of people who don’t understand why they need a pension, then have a look at the Portafina YouTube channel for some of the basics, and you might come away with a much clearer idea of just how much your pension could be doing for you.