Starting early is one of the best things your employees can do to build a healthy retirement fund. Not only do they pay more in, but they benefit from compound returns for longer.
For example, figures from Royal London show that paying £100 a month into a pension from age 18 would give an employee a pot of more than £137,207 by age 68 (assuming annual growth of 3%).
This comes from £60,000 in contributions and more than £77,000 in compound returns.
In comparison, if they waited until they were 45 and contributed the same monthly amount, they’d pay in £30,000 and see compound returns of just £14,349, giving them a total pot of £44,349 at 68.
So, the first person has paid double the amount into their pension, but crucially, the compound returns mean their pot is more than three times as big.
That’s why it’s important to help younger employees and ensure they are engaged with their pensions. Unfortunately, the data shows that Gen Z – those born between 1997 and 2012 – may be neglecting their pensions in favour of other options.
Gen Z are saving in gold and crypto instead of pensions
As it becomes easier than ever for the average person to invest using simple apps on their phone, younger people may be more proactive about building wealth for the future. However, research shows that Gen Z could be underutilising their pensions and, in some cases, opting for riskier investments instead.
According to Pensions Age, cryptocurrency ownership among Gen Z has increased by 43% in the past six years. Gold ownership also rose by 50% in the same period, and investment in stocks and shares increased by 45%.
While it’s a good thing that younger people are investing more, the same research found that pension investment among Gen Z has fallen by 10% in the same time frame. This suggests that younger employees might not be taking full advantage of their pensions.
Additionally, if they’re investing heavily in cryptocurrencies or putting all of their savings into a single asset, such as gold, they could be opening themselves up to significant risks.
Only 9% of Gen Z are using their pension provider’s app
To effectively plan for retirement, your employees need to know how much they have in their pension, what they’re contributing each month, and how their funds are invested. As you may know, they can see all of this information and make necessary changes on the ZIO app.
However, separate research reported by Pensions Age found that only 9% of adults aged 18 to 24 had accessed their pension provider’s app at all. This is despite the fact that 81% use mobile banking as the main way of managing money.
Although these are UK-based studies, they demonstrate universal issues with Gen Z potentially being disengaged from their workplace pensions.
5 ways to engage Gen Z employees with their workplace pensions
1. Explain the benefits of compound returns
As discussed earlier, paying into a pension from a young age can increase the level of compound returns your employees benefit from. If they’re already engaged with investing, as many in Gen Z are, they should grasp this concept easily.
Stressing the value of these long-term returns could encourage younger employees to contribute more to their pensions now.
2. Emphasise the value of tax relief
Gen Z employees might choose to invest outside their pensions because they’re overlooking important benefits, such as the tax relief they receive on their contributions.
It’s important to emphasise the advantages of tax relief on personal contributions employees pay to their pension.
3. Highlight how investment choices could align with their ethical values
Younger employees may be engaged with social issues that influence their investment decisions. For instance, they might avoid investing in companies that contribute to environmental problems or manufacture weapons.
You can use this to engage them by explaining the different investment options available to them through their pensions, and how certain funds could align with their ethical values.
4. Focus on visual content
Making information accessible and engaging is key to encouraging Gen Z to be more proactive about their workplace pensions.
That’s why you should focus on visual content as much as possible.
5. Educate them about the features of the ZIO app
The ZIO app is a vital tool your employees can use to manage their workplace pensions. There is also a bank of useful educational materials that will help them further recognise the benefits of their pension and take control of their retirement savings.
It’s beneficial to educate employees about how to use the app when they’re first enrolled in the pension scheme. You might also want to have refresher sessions from time to time, so everybody is up to date on the latest features.
We can cover much of this information in a pensions and financial wellbeing presentation for your team.
Read more: Why a pension and financial wellbeing presentation is important for your employees
Get in touch
If you need support educating your employees about the benefits of their pensions, you can email pensions@rfsl.co.uk to learn more about our services today.
Alternatively, call 01534 502000 in Jersey or 01481 747940 in Guernsey to discuss how we could support your business.
Please note
This article is for general information only and does not constitute advice. The information is aimed at individuals only.
All information is correct at the time of writing and is subject to change in the future.
A pension is a long-term investment not normally accessible until 50 (Jersey/Guernsey benefits only). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.
The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change.
Rossborough Financial Services Limited is regulated by the Jersey Financial Services Commission under the Financial Services (Jersey) Law 1998 and licensed by the Guernsey Financial Services Commission.