While putting enough money aside to live comfortably in retirement has been the goal of many workers, a change in attitude among younger workers means this may no longer be the case.
Gen Z are increasingly moving away from retirement savings, preferring to get more in their monthly salary than previous generations.
This has an impact on employer payroll obligations and must be accounted for to prevent non-compliance.
Each generation brings with it a different attitude to life and the workplace and Gen Z are no different.
Unlike previous generations who may have believed in working the system for some deferred benefit, growing up in a world shaped by the 2008 financial crisis and then altered more by the pandemic means that they are more likely to focus on short-term benefits, as there is less of a belief that long-term rewards will ever manifest.
This can be seen in the Gen Z preference for job hopping should better opportunities appear elsewhere and is mirrored in the approach to retirement planning.
According to the Department for Work and Pensions, in Q3 2020/21, 6.6 per cent of 22 to 29-year-olds had opted out of a pension and this increased to 11.5 per cent by the same point in 2025/26.
Not entirely isolated to Gen Z, 12.7 per cent of Millennials aged 30 to 39 had opted out of pension contributions in Q3 2025/26.
For as long as the cost-of-living crisis puts employees under more pressure and concerns around climate change and global instability make retirement seem less likely, it can be expected that more workers may shift away from pension savings.
When an employee stops saving into a pension, employer contributions must also stop.
Depending on how long the employee has been engaged with a pension scheme before they opt out, the next steps are quite different.
If an employee opts out of a pension scheme within one month, effectively as soon as they are being auto-enrolled for a pension, then they are to be treated as though they never enrolled in a pension at all.
This means that if a contribution has already been collected, it must be refunded to the employee.
To avoid facing potential issues with employees not being enrolled in a pension plan, you should keep a written record of their opt-out notice for at least four years.
Should the decision be made once funds are already in a pension pot, there is no obligation for you to offer them a refund.
Employees can contact the pension provider themselves to find out how and when funds can be accessed, but your role is more observational.
You should monitor the payroll records to ensure that neither you nor the employee are paying into the pension pot unless you receive explicit confirmation that an employee would like to resume contributions.
While you might have concerns with how your employees are choosing to approach their finances, it is not an employer’s place to engage too deeply with pension contributions.
Opting in or out of a pension must be the employee’s choice and cannot be used to influence hiring or promotion decisions.
You cannot force an employee to make a decision either way, so keep involvement to a neutral presentation of the facts and an ongoing assessment of payroll records.
Our team of expert accountants can help you to manage all of your payroll obligations.
With different employees taking a different view of compensation, it can be complicated to keep pace with all requirements.
Getting things wrong can sour relationships with employees and lead to penalties from HMRC, so having expert support can prevent issues.
Speak to our team for expert support with payrolling and pension enrolment obligations.
