Young professionals change their view of saving for the future
18-34 year old professionals have better savings habits than any other age group of workers according to new research from LifeSight, Towers Watson's UK DC master trust. The survey of over 5,000 employees shows that 18-24 year olds are the nation's most enthusiastic savers – having saved the greatest percentage of their salary (10.9%) in the last year.
The surprising results demonstrate a dramatic transformation in the attitudes of younger people towards saving. The findings also show that 44% of 18-24 year olds and 39% of 25-34 year olds prioritise saving. This responsible approach of Britain's young adults contrasts starkly with the preceding generation; of people aged 35-44, only around 34% prioritise saving.
Fiona Matthews, Managing Director Towers Watson Master Trust, stated:
"In the UK, from the post-war boom in the 50s onwards, there has been a gradual but growing trend for the youngest generation of adults to spend more of their income in the present and to save less for the future. This development was stimulated by a combination of socio-economic factors: economic growth; greater access to and availability of cheaper lines of credit; the introduction of mortgages requiring little or no deposit; and declining interest rates."
Matthews continues: "Our findings indicate that this generational attitude towards saving may well have peaked sometime over the last few years. This change – if it lasts – is to be welcomed. We were facing an unsustainable situation – particularly with an ageing population and an increasing life expectancy. Young people are showing a more responsible attitude towards saving and this will have an impact on society and the pension and financial services industry."
However, there does remain a significant gap in terms of the Millennials' willingness to talk about long-terms savings and their knowledge of pensions. Only 12% feel informed about pensions and a tiny 14% of 18-24 year olds have talked about pensions/long-term savings in the last 12 months. This rises to 30% (25-34), 35% (35-44), 42% (45-54), 59% (55-64). Some 83% of 18-34 year olds have little or no awareness of the Government's recent pension reforms.
Matthews concludes: "Our findings show that there is a generation of young adults who are prepared to save more of their salary and plan for the future. But there are major challenges ahead. The vast majority of young adults are in the dark about pension reforms and how they might be affected. But our survey shows they want to talk about pensions and learn more. There is a great opportunity for pensions experts and employers to educate younger workers on what options are available to them to save for retirement. In particular, they need firm guidance and support from their employers on pensions and what the new reforms mean for them, so they can start planning now. Employers should lead the way and support younger workers in planning for a secure and prosperous retirement."