Savers over the age of 60 are throwing away up to £1.75bn in pension contributions by opting out of their workplace schemes, according to Royal London.
The mutual insurer analysed its own figures, which indicated a 23 per cent opt-out rate among the over 60s compared with 10 per cent across all other age groups.
According to calculations from Royal London, an individual in their 60s on the average wage paying the minimum pension contribution of 8 per cent would have a retirement pot of just under £14,000 by the time they reach age 65.
Given that pension contributions are made up of contributions from workers and their employer, to which tax relief from the government is added, individuals would only need to contribute about £6,600 of their own money to achieve this outcome.
This means by opting out of their pension each member could be missing out on £7,000 each, the mutual insurer stated.
According to data from the Labour Force Survey, there are approximately 1.1m people aged 60 or over who are in full-time employment, which means more than 250,000 people could be affected.
If each saver stands to lose up to £7,000, then collectively this group could be missing out on as much as £1.75bn in retirement savings by opting out, Royal London added.
According to a pension specialist at Royal London, it is understandable that someone at the age of 60 might think it is too late to save enough to make a difference to their retirement income, but she stressed “they are wrong”.
She said: “Our figures show older workers are throwing away thousands of pounds on retirement income by opting out of their scheme. We would urge anyone thinking of opting out of their auto-enrolment scheme to think twice before doing so.”
If the decision to opt out is solely down to budgetary pressure – not being able to afford pension contributions – then it might be understandable, even if misguided.
But it is more concerning that people opt out because ‘it’s not worth doing’. The problem with that is they will lose both the employer contributions and tax relief.
Royal London maintained, “There is a significant, number of people saying “no” to what is effectively free money. More thought and effort should be put into educating the over 60s as to the very real benefits they’re giving up.”