The savers refusing to use pensions – because they don’t trust them

Millennials tell Charlotte Lytton why they have turned their backs on traditional saving routes

‘I always think about how I can earn more money not about how I should save money’

Liz Oughton Self-employed musician and teacher is investing in property ‘I get nervous about putting my money somewhere I can’t get before a certain age’

What’s the point of locking your money away for the future when you could be spending it now instead? So goes the logic for many millennials, of whom fewer than ever are saving for retirement.

That’s the case for Jenny Woolf * who has £7,000 in the bank, and just £ 250 in a pension pot from a brief teaching stint. She sees herself as being “very much in the doom-spending category” – those who consider their savings so far from being able to fund something meaningful that they simply don’t bother putting money aside; instead, they just buy more stuff. On social media, posts celebrating vintage Chanel handbags or exotic holidays are often the mark of a doomspender: “little luxuries” procured in spite of, or perhaps to distract themselves from, the state of their finances.

Half of what Woolf, 33, has will go on her forthcoming wedding, and locking money away in a pension “doesn’t feel worth it”, she says. “I feel almost quite freed by it – that I’m so far away from buying a house. I just go ‘ yeah, let’s spend’,” she says of her mentality.

Woolf is not the only millennial for whom pension planning has become last on the priorities list – or fallen off it completely. A recent report from InvestEngine, an investment firm, found that just 11pc of 18 to 34-year-olds are saving for retirement, with 61pc saying they are more focused on their immediate financial challenges instead (14pc said they were relying on their inheritance for any future wealth).

Some fear that the retirement age will keep rising so high they won’t actually be able to unlock their pot; the International Longevity Centre UK has predicted that retirement age will hit 70 come 2040. Others believe that the financial system will have imploded by the time they are due their payout.

That includes 35- year- old Anya Kuvarzina, who says that while she has always been told pensions are a good idea, “I didn’t trust it, for some reason. I didn’t want to get in any long- term agreement with anything to do with the Government.”

With the sharp decline of companies offering gold-plated pensions, and the whittling away of many previously generous schemes, the landscape has changed radically for this generation.

Self-employment has risen across the board (up by 25pc since 2000), while the explosion of start-ups has led to employees clamouring for perks such as profit share or offices with kombucha-filled fridges in lieu of real benefits. Those who are employed are auto-enrolled, where employers and workers pay into workers’ pensions – although it is possible to opt out. A Gallup report called millennials the “job-hopping generation”, with the cohort three times as likely to have switched roles in the past year compared with Gen X and baby boomers – often leading to a smattering of small pension pots they lose track of.

As a result, future- proofing looks different for today’s young people, explains Marcus Bullus, of Oxhouse Square, a wealth management company. That doesn’t mean they are less clued up; the rise in access to information online means younger people “want to be involved in the process, compared with an older generation of investors that were happy paying into a pension while not really knowing who was looking after it or where it was invested”.

Bullus notes that years of storing cash in low-interest rate savings accounts has given young investors little and now they are pursuing avenues that promise bigger returns. That prompted Kuvarzina to begin investing in cryptocurrency five years ago. Though she knew nothing about deregulated cash, seeing the option to invest on her banking app gave her confidence that it was worth a go. “I would just throw some money into Bitcoin and see it grow, and it was very exciting,” she says of the early days, when she’d put in a spare £50 or £100.

Now, half a decade later and running Art Lab, an illustration agency, those sums have risen to £500 or £1,000 at a time, with Kuvarzina typically withdrawing the money within a matter of hours, once she has accrued a small profit. She has no intention of tying her money down long-term, she says, less still in a pension. Her distaste comes from “a need to be independent, and to rely on my own resources”.

It is only a lack of disposable income holding Kuvarzina back from investing more – but she does not keep tabs on how much this method has netted her, nor does she expect to make anything big in the short term. “I always think about how I can earn more money and I never think about how I should save money,” she says, such as taking further courses in education or business. “I make bigger goals and it has been working out so far.”

Millennials are the biggest cryptocurrency investors, with figures showing that a 29-year-old is twice as likely to own virtual cash than those over 45. But buyers must beware that it “has no intrinsic value and is not protected by the Financial Conduct Authority”, Bullus says. “If someone loses access or has their crypto stolen, there is very little they are able to do and I have spoken to clients to whom this has happened.”

He is more optimistic about the safety nets afforded by pensions or Isas and points too to property – “a proven asset throughout the years” – for its nest-egg potential. Naturally, affording it is the main roadblock for millennials; figures from the Office for National Statistics last year showed that the average home in the capital costs 14 times the typical household income.

But it remains an investment goal for many, including Nina Francis-Young who, having recently set up her own family law coaching business, is eschewing saving for a pension in order to purchase a buy-to-let holiday home. “Not only will this enable me to take my children away on holiday,” the 39-year-old says, “but when I come to retirement this will see me through.”

She had originally wanted to buy in Norfolk, but the property was too pricey so she instead purchased a home in north Wales. She does not expect it to make money while rented out, “but to cover its costs and pay off the mortgage so at retirement I have a lump sum”.

Liz Oughton is also investing in property: the one she currently lives in. A self-employed musician and teacher, she opened Bostin’ Bakery in Willenhall, West Midlands, during the pandemic, and is using her combined earnings to overpay on her mortgage by around £6,000 per year instead of putting the money into a pension. The 36- year- old says that knowing the funds are being used for something she is already benefiting from feels safer. “I get a bit nervous about putting my money somewhere that I can’t access before a certain age because there’s so many things that could happen … I don’t trust what will have happened to the economy over the next 40 years.”

She adds: “[I] know private pensions are possibly more secure than most [investments], but it’s been such a turbulent few years in terms of people not getting payouts that they thought they would, or not retiring at the ages that they thought they would.” Oughton admits she has spent little time investigating pensions, an attitude she thinks is generational: her parents worry about her lack of long-term savings, she adds, but “they are boomers, aren’t they, so they’re very sorted”.

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