New research from leading online pension provider, PensionBee, has revealed the varying retirement plans for each generation and how the coronavirus pandemic has affected them.
Surveying 2,000 UK citizens, across three generations: Gen Z (18 – 23 years old), Millennials (24 – 40 years old) and Gen X (41 – 54 years old), PensionBee found almost half of respondents felt the pandemic would affect their retirement. On average, they expected plans to be halted by a year and a half, with Gen Z savers expecting a two-year retirement delay.
This is despite Gen Z savers appearing on track to retire with larger pension pots than both Millennials and Gen Xs. Unsurprisingly, the survey found that Gen X savers, who are the closest to retirement, have the largest pension pots, with an average of £33,547. The average Millennial pension pot stands at £22,049. However, thanks to the introduction of Auto-Enrolment which compels employers to contribute towards the workplace pensions of eligible staff, Gen Z are hot on their predecessors’ heels, with an average pot of £21,765.
The data suggests that it is the youngest generation, Gen Z, that is the most clued up about their pension savings. Just 23% of Gen Z respondents confessed to not knowing how much money they’ve saved for retirement, and only 3% stated that they hadn’t started saving for their retirement, the lowest percentage of all the generations.
In contrast, a quarter (26%) of Millennials said they didn’t know how much they have saved, with more than a third (34%) of Gen X savers admitting the same, despite being the closest to retirement age. More concerningly, 14% of Millennials and 14% of Gen X savers said they had no private pension savings, with 4% of the Gen X group stating that they didn’t understand how pensions work – the highest proportion of all the generations.
A lack of engagement and transparency around pensions has left each generation in doubt; but none more than Gen X. 16% of this generation fear they won’t be able to live comfortably during retirement, in comparison to 12% of Millennials and 5% of Gen Z savers.
When asked their ideal retirement age, all three generations came in well below the current State Pension age of 66. Gen X respondents believe 61 would be the ideal age, while both Gen Z and Millennials agreed on 58, meaning they will all have to rely on personal and workplace pensions to fund the initial years of retirement.
For the youngest generation, there seems to be a willingness to bring this retirement age even further forward, with one in 10 (11%) Gen Z savers even considering not having children so they can retire earlier. 4% of Millennials also agreed with this sentiment.
Alongside clear intergenerational variance, PensionBee’s research also highlighted notable regional differences in retirement savings. Edinburgh was found to be the city with the largest average pension savings of £82,000. Meanwhile, just 45 miles away, Glaswegians had the smallest pension savings of £22,900. This is despite the average salary in Edinburgh (£31,000) being £2,000 less than Glasgow.
The largest average pension savings in England were found in Southampton at £58,900. The city with the smallest average saving was Norwich at £30,300. Despite London having the highest average salary in the UK (£38,000), Londoners only have the eighth highest average pension pots at £52,299.
Romi Savova, CEO of PensionBee, commented: “It’s very encouraging to see the younger generation preparing for their future, proving that it’s never too early to start thinking about retirement. Our research highlights that most savers would like to retire early, so it’s of paramount importance that they build up a personal pension that they can access from the age of 55 (rising to 57 in 2028), in order to not have to keep working until the State Pension age of 66. At PensionBee, we’re passionate about helping consumers take control of their pension savings so they can look forward to a happy retirement.”
Here are PensionBee’s top tips for getting your pension in order and retirement plans back on track:
- Calculate how much you have and how much you need – It’s estimated most people will need about 70% of their salary to live comfortably in retirement, but the amount you’ll require largely depends on your circumstances and lifestyle. It’s important to think about how much you can afford to save, how long you’ve got until you retire and your desired retirement income. PensionBee’s pension calculator can help you crunch the numbers to give you a target savings amount and an accurate snapshot of what your retirement could look like.
- Start saving sooner rather than later – The earlier you start saving into a pension, the more time it will have to grow. If you leave your pension untouched for several decades, a small savings pot could turn into a much bigger pot by the time you retire, thanks to compound interest. The longer you wait to start saving, the more of your salary you’ll have to sacrifice each month to reach your savings goal.
- Check your State Pension entitlement – Due to rising life expectancies and an ever-increasing State Pension age, there’s no guaranteeing what today’s younger workers will receive by the time they retire. At the moment all workers need to have paid National Insurance Contributions for at least 10 years to qualify for the State Pension. To receive the full amount of £179.60 per week (2021/22) you’ll need to have paid for at least 35 years. To ensure you’re on track to receive the full amount you can view your National Insurance record online using the government’s State Pension checker.
- Find your old pensions – If you’ve had multiple jobs in your career, you may have been enrolled in various workplace pension schemes. If you’re unsure, try the government’s Pension Tracing Service. Simply enter either the name of your pension provider or your former employer and it will try to locate the details of your workplace scheme. Alternatively, you can contact your old employers for help or ask your new pension provider for assistance.
- Consolidate your pensions into one plan – This will make your savings easier to manage and help prevent you from losing track of your hard-earned money from previous jobs. In addition, you’ll only pay fees on one larger pension pot, rather than paying multiple fees on a range of smaller pots.
- Make sustainable withdrawals – If you’re able to access your pension, consider how much money you may want to take out of it. It may be more beneficial to think about any future withdrawals in percentage terms, rather than pounds and pence. If you set a percentage figure for your withdrawals, these automatically reduce in size when markets are lower. This adjustment in thinking, should help you to avoid cashing in too much of your pension too soon.