Young savers are willing to give up employer contributions to save for retirement in the lifetime ISA (LISA), despite this reducing their potential funds.
More than a third (34%) of 16 to 34-year-olds would rather use an ISA to save for retirement than a pension, according to Capita's Employee Insight Report.
Furthermore, 60% of 16 to 34-year-olds believe the LISA will have a positive impact on savings, while just 8% disagreed and 32% said they were unsure.
However, if young savers were asked to choose between a pension and LISA, most said they would opt for the pension.
The findings, published 4 October, will deepen concerns a significant number of young savers will use the tax-free savings vehicle, despite missing out on employer contributions.
The LISA, announced in former chancellor George Osborne's budget in March, is due to be implemented next April. However, some providers may not be ready for the product, and a majority of pension professionals believe it should be delayed, according to PP research.
Capita's research also found distrust in the pensions industry is decreasing. Almost two-fifths of respondents (39%) said they did not trust the industry, compared to 43% in the same research last year. However, just 16% said they trusted the industry.
The findings are based on the results of a survey of more than 3,000 employees between 21 April and 12 May.
Head of DC proposition and strategy Anish Rav said the industry needs to do more to communicate the benefits of being enrolled in a pension scheme.
"The annual Employee Insight Report has again provided a valuable insight into today's workforce and their views on pensions and retirement.
"It's easy to see how LISA could become popular, but it's crucial that younger employees properly evaluate just what they will be giving up if they do decide to stop saving into their pension to redirect into a LISA.
"While the research reveals growing trust in the pensions industry, it is also clear employers need to be doing as much as possible to explain and communicate the options their employees have at their disposal."
The research also discovered 38% of 16 to 34-year-olds would give up their employer's contribution if it meant they could use their pension more flexibly in order to, for example, buy a home. However, 42% said they disagreed.
The finding echoes a suggestion by pensions minister Richard Harrington. Speaking at the Conservative party conference on 3 October, he said savers should be able to use their savings to buy a home, and was considering rolling the flexibility into auto-enrolment in the future.
Meanwhile, almost half of employees (45%) said they believed private pensions should be compulsory, regardless of earnings, while 18% disagreed.
Another 49% said pensions terminology is complicated, confusing, and a barrier to effective retirement-planning.
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