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Penfold Highlights Challenges for Gen Z in Saving for Retirement

Pension provider Penfold has revealed new data showing that Gen Z savers contribute an average of only £98.89 per month to their pension pots, which is less than half the average monthly contributions of non-Gen Z savers.

This highlights the potential challenges that younger generations face in saving for retirement and the possible lack of financial education needed to understand the importance of saving for your pension from an early age.

Penfold‘s analysis of their customer data reveals that while Gen Z is actively contributing to their pension pots, they are still not saving enough for their future. Based on their contributions, they would need to save for 59 years, meaning they wouldn’t retire until they were between the ages of 77 and 85. This is significantly later than the age of 65, which 18-24-year-olds believe they should be able to retire by, according to a YouGov survey.

As the state pension age in the UK is set to gradually rise to 68 between 2044 and 2046, it’s becoming increasingly important for younger generations, including Gen Z, to start saving for retirement as early as possible. With this in mind, Penfold has looked into Gen Z’s pension saving habits and how they can set themselves up for a secure financial future and a comfortable retirement.

Penfold’s data also indicates that a higher percentage of Gen Z individuals participate in workplace pensions compared to private pensions. However, the average monthly contribution for Gen Z is still below what they should be saving for their age group and average salary, which suggests that Gen Z’s prioritization of pensions is less than other key life savings events such as home ownership or holidays.

Starting early

The study suggests that 41 per cent of 18-24-year-olds are only making their employers’ minimum contribution, which may leave them short when it comes to retirement. Penfold recommends starting to contribute to a pension pot as soon as possible to benefit from compound interest and government and employer top-ups.

Young adults should aim to save five per cent of their income each month, even if it is a small amount. As salaries grow, individuals should put more money into their pension pot to accelerate savings. They should merge multiple pensions from previous jobs for better oversight and easier management. Penfold also recommends avoiding high fees by researching pension fees and choosing a plan with lower charges to maximize returns.

In addition, taking calculated risks and investing in higher-risk assets for potentially higher rewards, depending on risk tolerance, can help grow retirement savings significantly. Gen Zers can also take advantage of online resources such as articles, blogs, and forums to learn more about retirement savings and investment strategies.

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