Millennials are struggling to save for retirement as they prioritise short-term finances, a new study has found.
According to Phoenix Group, six in ten (59%) millennials in the UK say their current life stage means they struggle to save for retirement, the highest among all generations, but hope to save more in the future. This compares to 48% of Gen Z and 39% of Gen X.
A quarter of millennials say income change is the main reason, while 24% cite childcare responsibilities. Millennials are twice as likely as any other age band to cite childcare as a reason for not saving for retirement.
Phoenix Group said there are a number of life events affecting millennials’ ability to save, including parental leave, childcare commitments, buying a home and a career change or break. As a result, just one in five millennials say paying into their pension is a priority, with short-term financial goals seen as more important. For 7% of millennials, financial pressures have led them to decrease their pension contributions in the last year, while the same percentage said they had stopped pension contributions altogether.
Patrick Thomson, head of research analysis and policy at Phoenix Insights, said: “The stereotype of the spendthrift generation is all too familiar when it comes to millennial finances, but the reality is far removed from the ‘avocado on toast’ tag placed on them.
“The research finds some millennials have decreased or stopped pension contributions entirely but the numbers doing this remains low, underlining the benefits of people being opted-in to pension saving as default. However, there is a risk that if people don’t readjust their savings once they have got through a short-term financial challenge they will reach retirement with much less than they’d hoped for.
“As many as 17 million people are not saving enough for the retirement they expect so it is important people take steps to address saving gaps where possible. Employers also play a vital role in supporting their staff to maintain retirement saving at key life stages, including continuing employer contributions during parental leave.”
