The DWP has released a  new set of number for opt out of workplace pensions among young people.

One in ten workers under 30 (9.3%) entitled to join an auto-enrolment pension scheme are opting out, according to this new research.

The cost of living crisis has led to 500,000 people opting out of their auto-enrolment pension payments a year, according to the report from Lubbock Fine Wealth Management which submitted a Freedom of Information request to the DWP.

A similar number of Millennials (9.4% of eligible workers age 30 to 40) also opted out last year.

Andrew Tricker, Chartered Financial Planner at Lubbock Fine Wealth Management, said:

“It’s a real concern that so many younger people are opting out of auto-enrolment. The maths shows that if you want to build up a healthy pension pot you should invest from as early an age as possible.

“Many young people are living on such a tight budget that skipping that auto enrolment contribution seems like the only way to make ends meet.

“They have student debt to pay back, the pressure to build up a deposit for their first home and the cost-of-living crisis. It is not surprising they aren’t saving for a date that is 30 years away.”

There is no way that this can be sorted by fiscal incentives.Young people were initially the most enthusiastic group of British workers – now I sense an increasing wish to not rely on institutions which is what large workplace pensions have become.

So long as workplace saving has no purpose in their eyes except to gather wealth, many young people of Gen Z and those who come behind will prioritise other things.

These do indeed include short term saving in setting up families with houses and cars. Many will have student loans and the relentless increase of wages as “real growth” is no longer a certainty in my son’s life.

A combination of “pinch” and “ambition” will drive young people away from the obvious incentives. Right now we need to get back to basics. Pensions are just that, a way to buy a right to an income in later life that is an insurance against old age.

If there is a feeling among young people that the state won’t do that for them when they grow old, all the more reason for them to do it with the employer. The answer is not to make saving more sophisticated but to make it more purposeful.

A recent publication I’ve published on her from Canada shows how it can be done. It shows that  young Canadians value pensions more than homeownership.

The point here is that it is pensions that are valued and not some vague concept of future wealth. I have written elsewhere that I remember when I was of an age of Gen X and Z, I wanted a long-term future for myself and my family based on after-work income. I sense we’ve lost that aim when we brought in “pension freedom”.

I hope we get it back and win back the support of younger people as we had when auto-enrolment started.

This rise in Gen-Z AE opt-outs is not good; “freedom” has lost  support, we must return to pensions