Pension savings habits have been hit by coronavirus, new research from money.co.uk has found a “cross-generational divide” in how British people view their current finances. Worryingly, this research showed many who are nearing their retirement years are deprioritising their pension contributions.
money.co.uk surveyed 2,000 people spread across Generation Z (those generally born between 1997 and 2012), Millennials (those born between 1981 and 1996) and Generation X (1965 to 1980) in June 2021.
The results from this survey showed “gen zers” are placing the biggest focus on savings, with the generation admitting to saving on average nearly a fifth of their monthly pay (17 percent).
This is followed by Millennials who are saving on average 11 percent, and Gen X saving on average 10 percent.
money.co.uk noted that “once the bills have been paid”, all the generations appear to be prioritising buying a home or going on holiday.
Nearly a third (32 percent) of Gen Z savers are saving for a home, but both millennials (38 percent) and Gen X (41 percent) savers are putting money away for a holiday.
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“These generational differences in attitude could be a result of pension misunderstandings, and not having a clear understanding of how much exactly should be paid into a pension.
“Cross generation, there is a disparity when it comes to how much people contribute to their pensions, with Millennials least likely to make additional contributions on top of their auto-enrolled amount.
“Despite this, Brits are in agreement that on average around £22,500 a year will be needed for a comfortable retirement.”
money.co.uk noted there is “no denying” different generations will have differing financial concerns which the pandemic may have exacerbated.
Understandably, Gen Z individuals have the most optimistic attitude towards saving money, being the generation with the most time ahead of them.
For Gen X however, retirement seems to be the biggest burden on their mind, with almost half (44 percent) admitting to being worried they won’t have enough money to live comfortably once finishing work.
James Andrews, the personal finance editor at money.co.uk, issued a warning on this while providing advice to worried savers.
Mr Andrews said: “Everyone’s financial situation is different, but the earlier you start paying into a pension, the better result you’ll get at retirement.
“That’s because if you don’t start saving until you’re older, you’ll need to put far more away to catch up – as the money has less time to grow.
“Once you pass the automatic enrolment earnings threshold (currently £10,000 a year or £192 a week) five percent of your pre-tax salary goes straight into your pension to be topped up by your employer, unless you actively opt out or your firm has a more generous scheme in place.
“But while that might make some younger workers feel secure, remember that every extra pound you save a month in your 20s and 30s can be worth hundreds by the time you retire – but the later you leave it the less time that money has to grow.
“When it comes to staying on top of your work or private pension, your provider will send you a statement each year that details the funds you have built up – along with a projection of what this will be worth at your nominated retirement age.
“If you want more of an idea of how much you should be putting into your pension, or how much larger contributions now would add to your final pot, use a pension contribution calculator. This will show you what your pension is likely to be worth at retirement, based on what you’re saving now and how much is already there.”