Born after 1983? If so, you’re a Millennial, somewhere between 18 and 35 years old. Did you know that this age group is already saving and planning for their long-term financial future.
That shouldn’t really be a surprise. Over the last decade we’ve seen smart phones emerge, fast broadband become available and Apps that seem to tell us everything we need know.
What it means for people embracing the new technologies is access to information. Lots of it, including money advice. Making use of this tech is second nature to most Millennials.
They should be better informed, and Intergenerational Commission data suggests that more people from this age group are starting to pay into pensions more than ever before.
The days of the younger generation not worrying about pensions or their future would seem to be over.
Millennials have seen challenging times
The thing about Millennials is they have already lived through some turbulent financial times. As if the financial crash of 2008 wasn’t enough, they now have Brexit to throw additional uncertainty into their life mix.
That, however, could be the spur they need to plan ahead. Leaving the European Union is likely to influence investments, spending and wages into the next few decades. This will affect Millennials the most, not so much the soon-to-be retired or those already drawing a pension.
Everyone will be affected in one way or another, but the 18-35 age range need to think seriously about how they can enjoy a comfortable retirement.
Other factors, such as student loans, rising house prices and wage stagnation since 2008 have all impacted the Millennial generation. They’ve had it tough, but they’re ready for the fight.
Why are Millennials saving?
Data from the Intergenerational Commission reveals that Millennials see saving into a pension fund as the second priority after buying a house. For most people a roof over their head is still number one.
However, some are managing to do both. With auto-enrolment proving both popular and successful, the proportion of younger savers has risen dramatically.
Only those who choose to “opt out” don’t pay a modest amount into a pension direct from their wages.
In April 2018 the minimum auto-enrolment contribution increased from 2% to 3% of qualifying earnings for employees, and rose to 2% for employers. This will rise to 5% for employees and 3% for employers in April 2019.
When the initiative started many assumed that large numbers of young people would opt out. They’d prefer to spend on holidays and cars, it was thought. Not so.
Millennials have realised that the sooner long-term pension saving begins, the better value pension could be available to them in later life.
Pensions will change in the future
Because of mounting pressure on government budgets, and the likelihood that the state pension age might be increased in the future, it makes sense to plan and save.
It is expected that state pension age will rise to 68 some time in the 2030s. As people live longer, there could be further changes and it might mean that Millennials will work into their 70s before they can take a state pension.
There is also on/off talk about a UK pension dashboard. This, if launched as planned, will allow people to see what funds they have in both state pension provided by Government and in private pension schemes and work-based pensions.
Auto-enrolment pensions are a positive step forward. However, nobody should assume that these funds will solve all future financial requirements.
To enjoy a comfortable retirement, Millennials must consider saving additional monies. This could be from inheritance, or making additional payments into a private pension.
Employers can help to boost pensions
Employers could also play a role. For example, allowing employees to use bonus payments as top-up pension contributions would be a major step forward.
With a potential for increased visibility of pension savings via the proposed dashboard, Millennials will be able to take better control of what they save. They will be able to make changes and take independent financial advice along the way.
Whatever stage of the pension journey you’re at, we can always offer some friendly, impartial advice about pensions and investments.
Call the Logic Wealth Planning team if you need further information about pensions and retirement planning.
You can start the conversation with a quick call now: 0808 1234 321