Millennials are the generation most concerned about their retirement savings, with 66%1 worried they are not saving enough, according to new research from Standard Life, part of Phoenix Group. This compares to 60% of Generation Z, 57% of Generation X and 24% of those 60 and older.
Standard Life’s Retirement Voice research also highlighted the swathe of short-term financial anxieties surrounding Millennials, including higher interest rates and stubborn inflation. More than half (53%) of Millennials are concerned about rising interest rates, compared to 48% of Generation Z. By contrast, only 29% of Generation X and 14% of Baby Boomers find them concerning.
Millennials aren’t alone in their retirement anxieties, with over half (54%) of Generation X nervous that their finances won’t last for the duration of their retirement - perhaps due to their risk of falling in the gap between the decline of Defined Benefit (DB) pensions and the introduction of Defined Contribution (DC) auto-enrolment in 2012. Almost everyone worries about inflation – but Millennials are tied with Generation Z as the most concerned, at 73%. This compares to 67% of Generation X and just over half of Baby Boomers (56%).
Responsibility equals anxiety?
Most Millennials are currently in their 30’s, often recognised as a decade of responsibility as people move through traditional milestones of buying a house and starting a family. While exciting, these stages can initially increase people’s financial vulnerability, and disrupt their ability to plan for the long term, particularly at a time of economic challenge.
It’s not all doom and gloom
Luckily, Millennials have time to act. Standard Life calculations find that those who begin working aged 22 on a salary of £25,000 per year and pay the minimum monthly auto-enrolment contributions (5% employee, 3% employer) from the age of 22, could build up a total retirement fund of £210,000 by the age of 68, adjusted for 2% inflation. Those who increase their contributions by just 2% at the age of 30 could have £252,000 in today’s prices at the age of 68 - £42,000 more. An increase of 2% at the ages of 35 and 40 could lead to an additional £36,000 and £30,000 respectively, again adjusted for inflation.
Mike Ambery, Retirement Savings Director at Standard Life, part of Phoenix Group, said: “Millennials are often thought of as an anxious generation, with their early lives shaped by immense economic and geo-political change, and our research highlights this nervousness. Against the backdrop of tentative recovery from the cost-of-living crisis, many Millennials are currently balancing mortgage repayments, childcare costs and everyday expenses, and planning for later life is perhaps taking a back seat.
“There’s some good news for the long-term, however – firstly, it seems Millennials are aware that they are under-saving and so could be more inclined to act, when possible. They are also likely to have been auto-enrolled into a pension from an earlier age than their predecessors Generation X, meaning they’re more likely to have at least a basic level of pension savings to build on. Then, they have the gift of time – the oldest Millennials are still over 20 years from state pensions age and could boost their pot between now and retirement. Raising pension contributions can involve a trade-off between short and long-term financial pressures, but it’s incredibly tax efficient and, thanks to the power of compound investment growth, even a small increase can build up and make a huge difference.
“There’s another reason for Millennials to be optimistic – they’re set to become the wealthiest generation in history thanks to the Great Wealth Transfer, in which Baby Boomers will hand down £trillions worth of assets across the world. This won’t benefit everyone equally, however, and its important people make sure they provide for their financial futures!”
|
