59% of millennials are struggling to save for retirement but hope to save more in the future, compared to 48% of Gen Z and 39% of Gen X, according to Phoenix Group’s research among 4,000 UK adults.
25% of this group say income change is the main reason, and a similar proportion (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 the life events millennials face can have a huge disruption on their ability to save. These include parental leave, childcare commitments, becoming a homeowner and career change or break. Women are also disproportionally impacted at this stage as they are more likely to take on childcare and caring responsibilities. Previous Phoenix Insights research found the amount men and women save in their pension starts to diverge from 25-34 years old and continues to grow until men are saving 50% more per month than women by 45-54 years old (£245 vs £165).
The saving squeeze reflects how finances are prioritised among millennials. Just one in five (20%) say paying into their pension is a priority, with short-term financial goals seen as more important. For some, immediate financial pressures have led them to decrease (7%) or stop (7%) pension contributions in the last year.
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. As a millennial myself, I know first-hand the pressures many at this stage face weighing up competing priorities that pull us in different directions. This can lead to day-to-day essentials, such as housing or childcare costs, being prioritised over longer-term savings goals.
“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.”