How to­day’s mil­len­ni­als are sav­ing (or not) for re­tire­ment

The Daily Telegraph - Your Money - - FRONT PAGE -

Stretched by high liv­ing costs and stu­dent debt, how are young adults build­ing their pen­sion pots? Laura Suter finds out

Ris­ing hous­ing costs, soar­ing stu­dent debt and low wage in­fla­tion have left mil­len­ni­als with stretched bud­gets. So how is the gen­er­a­tion that came of age with the in­ter­net era start­ing to save for the fu­ture?

Re­search this week from the Res­o­lu­tion Foun­da­tion found that a third of all mil­len­ni­als could still be rent­ing prop­erty when they come to claim their pen­sion, thanks to high prop­erty prices in the UK.

By con­trast, a large pro­por­tion of to­day’s pen­sion­ers live in un­mort­gaged prop­er­ties, re­duc­ing their out­go­ings.

The cost of rent will put a fur­ther strain on pen­sion in­come, re­quir­ing mil­len­ni­als to have larger pots set aside for re­tire­ment.

How­ever, the days of “gold-plated” pen­sion schemes, also known as “de­fined ben­e­fit”, are as good as over, putting the onus on in­di­vid­u­als to save more them­selves for their re­tire­ment – rather than re­ly­ing on their em­ployer.

The Gov­ern­ment’s new au­toen­rol­ment ini­tia­tive aims to help this. It re­quires com­pa­nies to have a staff pen­sion scheme and stip­u­lates the con­tri­bu­tions that em­ploy­ees and em­ploy­ers must make each month.

This month the min­i­mum con­tri­bu­tion in­creased to 3pc for em­ploy­ees and 2pc for em­ploy­ers. Staff can “opt out” of the pen­sion and make no con­tri­bu­tions. So far, few have cho­sen to do so, but there are con­cerns that more will opt out as the min­i­mum con­tri­bu­tions in­crease – ul­ti­mately reach­ing 5pc for em­ploy­ees and 3pc for em­ploy­ers.

Ac­cord­ing to wealth ad­viser Til­ney, mil­len­ni­als are aware of the need to save for re­tire­ment; 46pc be­lieve you should start sav­ing for a pen­sion in your 20s.

Yet half said that they couldn’t af­ford to put money in their pen­sion as they’re sav­ing for a house de­posit or have no spare money af­ter pay­ing rent, stu­dent loan debt and other bills.

Tele­graph Money asked three mil­len­ni­als how they are ap­proach­ing their re­tire­ment sav­ings. Emily Lu­cioni, 28, had her first child just one month ago, but it has al­ready prompted her to think more about re­tire­ment and sav­ing for the fu­ture.

Ms Lu­cioni said that pre­vi­ously she was fo­cused on putting money aside for a house de­posit and then her wed­ding 18 months ago, mean­ing that pen­sion sav­ings took a back seat.

De­spite con­tribut­ing 3pc of her salary to her work pen­sion, Ms Lu­cioni, who works in client re­la­tions for a fi­nance com­pany, said that she knew she needed to save more to get the re­tire­ment she wanted.

“My par­ents don’t have an amaz­ing pen­sion and they en­cour­aged me to be in a bet­ter po­si­tion than they are,” she said. “I now con­trib­ute £80 each month through a self-in­vested per­sonal pen­sion. I save my con­tri­bu­tion into a ready-made port­fo­lio and then with tax relief I get from the Gov­ern­ment I have a bit of a gam­ble my­self.”

Ms Lu­cioni plans to carry on sav­ing into her pen­sion while she is still on full pay dur­ing ma­ter­nity leave. She said she was ini­tially wor­ried about fall­ing out of the habit when money be­comes tighter af­ter she moves to statu­tory ma­ter­nity pay.

“My hus­band has now said that he will con­tinue the con­tri­bu­tions each month, as my re­tire­ment is im­por­tant to him as well, and we don’t want to miss out on those pay­ments,” she said.

“We know that we want to go

‘I want to re­tire in my 50s, but I have a lot of short­term debt’

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