Millennials – those aged 25-34 years – are required to save 20 per cent of their annual income to enjoy the kind of retirement baby boomers are currently having, according to a new report by the International Longevity Centre.
The report has deemed the UK pension system ‘inadequate’, as young people today face a monumental savings challenge to ensure a decent retirement. Moreover, the findings offer further proof of the systemic intergenerational inequality in the UK.
Millennials need to tuck away 18 per cent of their annual income to enjoy an ‘adequate income’ at retirement, the report argues, while 20 per cent will put millennials on par with the baby boomer generation.
These figures, however, are more pie in the sky rather than realistic goals, unless the employer contribution is one of the more generous - 10 per cent or more.
Many millennials are in the position of juggling between paying off student debt and saving towards a house deposit.
In addition, most millennials will not have the luxury of being able to rely on generous financial salary pensions.
Over 30 per cent of people between the ages of 25-44 save no money whatsoever. But, sadly, this figure does not come as a big surprise, given that millennials pay over half of their income on rent and bills, and are also faced with twice the rate of inflation of older generations.
Furthermore, the report found that only 9 per cent of people in the UK have a specific savings target for retirement, compared to 29 per cent in the UK, 33 per cent in Singapore and 59 per cent in Hong Kong.
Dean Hochlaf, assistant economist at the International Longevity Centre, says: ‘The combination of persistently low returns, sluggish wage growth and a changing labour market means today’s young people will need to save more to enjoy their retirement.
‘The government must do more to extend pension coverage and ensure that contributions towards private schemes are sufficient, especially amongst overlooked groups such as the self-employed and those on low incomes who have yet to benefit from initiatives designed to improve private savings.’
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