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Need to know

  • Employees need to be clear about how much they need to contribute to their pension in order to achieve a moderate lifestyle in retirement
  • It is important to make employees aware of the value of salary sacrifice in workplace pensions.
  • Bite-sized, digestible financial content and video storytelling are effective ways of engaging younger employees with pensions.

Many employees in their 20s and 30s find the topic of pensions overwhelming, and for a variety of reasons, unappealing, but as a result, millions of future retirees are not on track to achieve an adequate income in later life.

Scottish Widows’ annual Retirement Report, published in May 2025, revealed that a quarter (25%) of employees in their 20s prioritise saving for emergency expenses and focus their main savings goals on house deposits and holidays. Meanwhile, 60% of those in their 30s know they are not saving enough, and 30% do not save. Of those in their 30s who earn between £20,000 and £35,000, 46% are mostly likely to contribute the minimum 8%. This group faces a 60% retirement income drop on average, with 70% seeing their income halved.

Low priority for younger staff

The statistics have serious implications because a shortfall in pension investments could leave many individuals facing financial insecurity in retirement. Those who are under-saving in their 20s and 30s miss out on the power of compounding; potentially the biggest advantage they will ever have in saving for retirement, says Ray Law, founder of HR financial wellbeing app Moneyappi. But he is not surprised that pensions fall lower on the priority list for younger employees. 

“When you’re dealing with immediate financial pressures like the cost of living, stagnant wages and trying to save for emergencies, retirement understandably feels like a distant concern,” he says.

He also points to a wider systemic issue that is evident across many financial wellbeing offerings: fragmentation. “The current market is filled with highly specialised, often siloed products, everything from salary advance schemes to pension planning tools,” adds Law. “While each solution may serve a purpose, they rarely form a unified experience for employees. The result is a fragmented spectrum of support that makes it difficult for individuals, especially younger ones, to navigate their financial journey in a way that feels relevant and joined-up.”

The value of salary sacrifice

Ensuring employees understand the value of salary sacrifice and the risks of reducing or stopping pension contributions is also of importance, says John Mullally, group risk and healthcare consultant at Cartwright Employee Rewards.

“It’s also important to highlight the merits of how a bank would view people investing into a pension,” he says. ”Now that mortgage applications are carried out using their ‘affordability’ formula, investing into a pension is looked upon favourably by a bank particularly when it is carried out by a salary sacrifice arrangement.”

When it comes to calculating the minimum retirement savings needed to achieve the best outcomes there is no one-size-fits-all number, but a useful rule of thumb is to aim for a pension pot worth 10-times annual salary by retirement, according to Chris Eastwood, founder and chief executive officer (CEO) at digital pensions provider Penfold.

“The Pensions and Lifetime Savings Association’s Retirement Living Standards suggest that to achieve a moderate lifestyle, a single person needs about £23,300 a year, or £34,000 for a couple,” he explains. ”To get to that, people typically need to contribute at least 12-to-15% of their salary, including employer contributions, throughout their working life.”

Missing the benefits of compounding

The 30 to 39-year-old age group is arguably the most at risk. Although far enough into their career to have meaningful income, they are often juggling financial pressures like childcare or saving for a home, and pensions can slip down the priority list. “Many aren’t saving enough, and unlike younger workers just starting out, they have less time to benefit from compounding,” says Eastwood. “That said, 20-somethings who opt out or make minimum contributions also face challenges, particularly if they never build the habit of saving at all.”

A multi-channel comms approach

So, what can employers actually do to engage those in their 20s and 30s with retirement savings in an effective way? According to Saba Haran, executive director, pensions at Howden Employee Benefits, a multi-channel communications strategy is essential.

“Bite-sized, digestible financial content and video storytelling work well for younger employees, while improving overall financial education and literacy is also key,” she says. “Research shows a strong link between financial literacy and better pension outcomes, suggesting that case studies and real-life examples can help drive engagement.”

Incentives, gamification, and rewards could further encourage participation. “Social media remains a powerful engagement tool, though concerns exist around misinformation,” adds Haran. “Employers can counter this by using interactive formats such as polls, Q and As, and live chats to provide fast, reliable, and engaging pension information.”