Four in 10 Gen Z workers are on track for retirement poverty if they stick to minimum auto-enrolment levels, new research reveals. Average earners relying purely on workplace pension minimums face retiring on a meagre £13,000 a year, according to Penfold - a figure that falls well short of covering basic living costs.
Minimum retirement standard
Pensions UK estimates the cost of a minimum retirement living standard for a single person is £13,900 a year. It says a "minimum" retirement covers basic living costs, with just enough money left over for a cheap UK holiday, one meal out a month, and low-cost weekly activities.
Born between 1997 and 2012, more than a quarter (27%) of Gen Z rate their pension knowledge as 10/10, yet just 10% can pass a basic pension test. Worse still, six in 10 (59%) believe that simply being auto-enrolled means they're saving enough for retirement. It does not.
Undersaving and opting out
Penfold co-founder Chris Eastwood said: "Almost nine in ten eligible workers now save into a workplace pension, but getting people enrolled is only half the job. The DWP estimates 14.6 million are still undersaving, and that problem is worse for Gen Z, who are juggling pensions with high rents and rising costs."
"Our research found 42% of UK twenty-somethings are on track for retirement poverty, yet 16.5% have cut their contributions, more than any other generation. When you're worried about paying rent, retirement feels a long way off."
The study uncovered that nearly one in five (17%) young workers aged 18 to 24 opt out of workplace pensions altogether - the highest rate of any age group. Delaying saving from age 22 to 27 alone could cost a staggering £40,000 in lost retirement funds.
Job switching and lost pensions
Furthermore, more than a third of young workers (38%) admit they have considered pausing their pension payments altogether to cope with immediate money pressures. The report revealed that young workers now average just over a year (1.1 years) per job in their early career.
Switching roles so quickly puts Gen Z at high risk of losing track of their pension pots, adding to the UK's massive £31.1 billion in lost pensions.
"We have to make pensions easier to engage with. Only 6% of 18-24 year olds checked their pension on an app last year," Eastwood added. "Young people take control when they can see what they've built up, know whether they're on track and work out what paying in a bit more would do."
