Why six in ten millennials are struggling to save for retirement

The financial balancing act millennials face

Research indicates that the current life stage of millennials (those in their late 20s to early 40s) is significantly impacting their future retirement plans, as short-term financial priorities take precedence[1]. The study, which surveyed 4,000 UK adults, reveals that six in ten (59%) millennials are struggling to save for retirement. In comparison, 48% of Generation Z (ages 18-26) and 39% of Generation X (ages 41 to 56) face similar challenges.

A variety of factors contribute to this savings shortfall among millennials. A quarter (25%) of them cite fluctuating incomes as the primary barrier to saving, while almost the same proportion (24%) highlight childcare responsibilities. Millennials, particularly women, are disproportionately affected by these life events, which often include parental leave, career changes, or a complete break from work. When combined with soaring housing and childcare costs, these responsibilities make saving for the distant future feel nearly impossible for many.

The widening gender savings gap

The research highlights how gender intersects with financial challenges at this life stage. Women in the millennial age group are more likely to face interruptions in career progression due to childcare or eldercare responsibilities. This not only reduces their immediate earning potential but also significantly impacts their retirement savings over time.

Data from the research highlights a stark disparity between men and women in terms of saving for retirement. From ages 25 to 34, the amount saved into pensions by each gender begins to diverge, and by the time individuals reach ages 45 to 54, men are contributing 50% more per month to their pensions than women (£245 vs £165). If left unaddressed, this gap leaves many women significantly less financially prepared for retirement compared to their male counterparts.

Short-term goals take priority

Despite the stereotype of millennials as frivolous spenders, with their brunch habits unfairly scrutinised, the reality is far from the “avocado on toast” cliché. Only one in five (20%) millennials report that paying into a pension is a financial priority. Instead, immediate concerns such as housing costs, student loan repayments, and childcare take precedence.

The research further reveals the strain that short-term financial pressures place on retirement savings. Over the past year, 7% of millennials have decreased their pension contributions, and another 7% have stopped contributing entirely. While automatic enrolment in workplace pensions has helped some maintain their contributions, the risk remains that individuals may not readjust their pension savings once short-term challenges ease. Left unaddressed, this could lead to a retirement savings gap that is too large to bridge.

The critical role of employers

Employers have a crucial role in shaping the retirement readiness of their millennial employees. For instance, continuing employer pension contributions during parental leave or work breaks can ease some of the financial challenges caused by these life events. Additionally, companies could offer tailored financial well-being programmes that help employees align short-term spending with long-term savings goals.

Educational initiatives are an important tool for employers. By increasing financial literacy and awareness, they can help millennials feel more empowered to plan for their future. Providing transparent and accessible guidance on how to adjust pension contributions following major life changes could make a substantial difference.

Failing to act could mean a retirement shortfall

It’s estimated that as many as 17 million people in the UK are not saving enough to achieve the retirement they expect. For millennials, this serves as a wake-up call. The earlier steps are taken to address gaps in savings, the more manageable and effective those adjustments can be.

It’s crucial to recognise that retirement planning doesn’t have to be overwhelming. Dividing it into small, manageable steps, such as gradually increasing contributions, seeking professional guidance, or utilising workplace benefits, can reduce much of the stress involved in saving.

Take charge of your financial future

If you’re feeling stuck in your saving efforts, know that you’re not alone, and help is available. We can assess your current financial situation and recommend tailored solutions to meet your retirement goals. Whether you’re facing short-term pressures or planning for the long haul, it’s never too late to start making a positive impact.

Contact us today to discuss your requirements or to learn more about the tools and strategies available to help you build the secure retirement you deserve. Begin taking control of your financial future now.

Source data:

[1] Research conducted by Opinium for Phoenix Group in September 2024 among 4,000 UK adults.

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