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Manchester Institute for Collaborative Research on Ageing

MICRA research suggests that threshold adults (aged 25-39 years) focus on establishing adulthood before saving for pensions

26 July 2018

Latest research from MICRA and The Pensions Policy Institute (PPI) considers workplace pension participation amongst threshold adults aged 25-39 years old and suggests it is limited by a defensive focus on establishing themselves in adulthood.

Threshold adults are those who have passed adolescence and are establishing themselves as an adult, usually aged between 25 and 39 years old. This follows qualitative research sponsored by the PPI and the Economic and Social Research Council into decision-making following automatic enrolment.

Since 2016 the number of people saving in workplace pension schemes has increased amongst 20- to 29-year-olds and 30-to 39 year-olds to 72% and 77% respectively, thanks to the introduction of auto-enrolment, but it’s still estimated that 36% of young people are under-saving. This is because many of those saving are doing so at minimum levels of contribution, which may not provide for an adequate retirement. While the minimum levels of contribution under auto-enrolment are set to rise in April 2019 to the full total amount of 8%, there is a concern that more threshold adults may start to opt-out when this happens.

This research highlights the importance of understanding why threshold adults limit their workplace pension participation in order to provide support and interventions that meet the specific needs of this group. Hayley James, author of the research, said “Young people in the threshold phase do not yet feel ready to engage with workplace pension saving, even if they might be able to afford to do so.

“This is due to a protective focus on becoming established as an adult, which is seen as an immediate and important priority. The process of becoming establishment is subjective, as individuals determine what it means for them. It often involves considerations of income, home-ownership and other major life events, which once achieved encourage individuals to engage with workplace pension saving.

“Threshold adults may need specific support to help them to prepare for their later life, taking into account the complex factors they face in becoming established as an adult, in order to ensure they can achieve adequacy in later life.”

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