Savvy millennials’ pension coverage increases 15%

A huge spike in pension ownership among millennials in the past six months has seen Irish private pension coverage surge to Celtic Tiger-era levels.

A survey of 1,000 respondents carried out on behalf of Standard Life shows private pension ownership climbing to more than half the population at 53% - up from 50% in December 2015.

The recovery to pre-recession levels has been fuelled in recent times by a 15% surge in coverage among younger workers aged between 25 and 34 years of age.

Standard Life pensions technical manager John McInerney said millennials appear better educated when it comes to pension coverage than workers in other age groups.

This is not only borne out of the significant uptake in coverage among younger workers in the opening half of the year but also their greater tendency to use pension top-ups known as additional voluntary contributions (AVCs).

Just over a third (34%) of those aged between 25 and 34 use AVCs compared with an average of 29%.

Just 24% of workers aged between 35 and 44 use the AVC pension top-ups to supplement their retirement earnings.

“Millennial savers appear quite savvy. AVCs are typically used by the more sophisticated, well-informed individual. It would be interesting if they discovered they’re using AVCs while their parents, closer to retirement age are not.

“Younger workers’ use of AVCs is not a once-off; they have heard about AVCs and decided to do something about it. They have form when it comes to AVCs,” Mr McInerney said.

Mr McInerney said the recent 15% surge is also likely explained by the general economic recovery as well as a first half bounce that’s often seen with workers deciding to take action on their pension as a new year begins.

While it may be the case that workers in this demographic - especially those in their 20s - can sometimes have greater disposable income than their peers if they don’t have a family, this is unlikely to be a major factor, he added.

Rather, it appears younger workers are either more aware of the pension options open to them or more proactive in providing for their futures.

Mr McInerney also believes many millennials have seen their parents or friends’ parents’ final salary pension schemes decimated or significantly reduced in value and have been encouraged to save early and adequately into their own pension pots.

Overall, pension ownership for 35 to 44-year-olds and those aged 65+ increased by 1% to 60% and 72% respectively.

Ownership among 55 to 64-year-olds rose 2% to 63% while pension ownership among those aged between 45 and 54 declined by 8% to 62%.