What Gen Z and Millennials think about retirement

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Generation Z and Millennials have grown up in a financial world transformed from that of their parents and grandparents – and often not in their favour. Our major new study has revealed how this has shaped the retirement attitudes and aspirations of under-40s. How do they compare to yours and what can you do to raise your own retirement expectations?

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The relationship that 20 and 30-somethings today have with money has been shaped by major cultural and economic shifts.

The UK economy has transformed since the time their parents and grandparents were passing their first money milestones and house prices have soared ahead of average wages. But Generation Z (aged up to 24) and younger Millennials (the generation aged from 25-40) were the first to have been automatically enrolled into a workplace pension from the start of their working lives. So, how positive do they feel about their finances and their prospects of a comfortable life after work?

Standard Life’s major new study of retirement attitudes – Bringing retirement into focus – surveyed nearly 5,000 people across five generations and the differences in expectations and experiences between the generations were stark.

Here we outline some of the key findings from these younger generations, who now make up more than 40% of the UK population and a growing proportion of the global workforce.

Do you share the confidence or some of the concerns of those surveyed? We have some ways you could improve your prospects for a bright future.

1. Caring at their core

Financial attitudes among both Gen Zers and Milennials show a caring and responsible core with a greater sense of responsibility for helping others compared with older generations. More Gen Zers and Millennials want to leave an inheritance (65% and 64% respectively) than any other generations, and more of them say caring for elders is important (68% and 66%) and believe they should provide financial support for their parents if required (39% and 37%).

This often extends to an expectation that their financial commitments towards others will last well into their own retirement. A quarter of Gen Zers said they expect to be paying for long-term care for a loved one in retirement.

If an aging population and growing pressures on social care does mean people now in their 20s and 30s may need to support themselves and others in retirement, then it’s all the more important to get solid plans in place now.

Having a workplace or personal pension is a great start because tax benefits and employers’ contributions mean that saving as much as you can afford into your pension pot can be the best way to save for retirement. But it’s important to understand that paying in the bare minimum throughout your career is unlikely to be enough to provide a comfortable retirement.

You can find out more about the benefits of tax relief, topping up and matching schemes in our article 7 numbers that explain what’s so good about a pension.

2. One eye on a future for all

Those surveyed also showed a stronger desire for responsible investing with 53% of Gen Zers and 51% of Millennials feeling they should be invested sustainably compared to only 44% among Gen Xers and 36% among Baby Boomers.

If you’re interested in seeing how sustainability issues and saving for your future can go hand in hand read our articles Aim to grow your pension pot and do good – is it really possible? or Climate change and your pension pot – discover the link.

3. Confident but with some concerns

When it comes to levels of financial engagement and confidence it’s a mixed picture. More than half from both generations say they are confident making financial decisions, though at 53% for Gen Z and 58% for Millennials these are the lowest proportions among all the generations. More than half from both generations also say they’re comfortable they understand financial products.

But set against this confidence there are also concerns. More Gen Z and Millennial interviewees are worried about spending too much now in case they run out of money in the future when compared with those aged over 50.

Attitudes to risk are mixed too. In both generations we found similar numbers saying ‘I prefer to take less investment risk even if it means I have less money over the long term’ to those saying ‘I’d be happy to take more risks with my money to get the chance of higher returns’.

If you want to know more about investment risk and help with finding out how much risk you’re comfortable taking with your investment go to our guide to Understanding investment risk.

There were also generational differences in how people expect to fund their retirement. Only 17% of Gen Zers (and 32% of Millennials) expect to use the State Pension to fund their retirement compared to 66% of Baby Boomers. You shouldn’t rely upon State Pension alone to fund a comfortable retirement because even the full amount provides less than a minimum wage salary. But if you do want to find out how much it could contribute to your retirement income and when you can receive it read our State Pension article.

4. The power of planning

One of the most important findings to come out of the whole survey was how big a difference planning can make to both expectations and experiences of retirement.

29% of Gen Zers and 28% of Millennials claim to have done ‘a great deal of planning or thinking’ about how much money they will need to live on in retirement.

While these figures are encouraging, they still leave a large majority of younger people having done little or no planning.

The positive emotional and financial benefits that planning can have are obvious when we compare the planners and non-planners in the study. Planners across all generations expect to retire four years earlier, believe their money will last eight years longer and are more confident in their financial decision making. And when we look at the actual experience of retirees, 89% of planners say they are enjoying it compared to only 78% of non-planners.

The good news is that if you haven’t started planning for your future yet, we have a host of guides, tools and articles that can help you get started. Try these for starters:

• Why not get to grips with your pension first? On our Pensions page you’ll find guides to pension basics, workplace pensions and the State Pension as well as a simple pension calculator to find out if you’re savings are on track so far.
• Establishing good financial habits when you’re young can help set you up for success later in life – this article has 5 financial habits to get into when you’re young
• If your plan includes giving up the day job and finding financial freedom sooner rather than later – read more about planning for early retirement.

The value of investments can go down as well as up and may be worth less than was paid in.

Tax and legislation may change. Your personal circumstances and where you live in the UK will also have an impact on your tax treatment.

The information here is based on our understanding in November 2021 and shouldn’t be taken as financial advice.