In Focus: Retirement Income  

Has Covid taught youngsters about long-term saving?

Romi Savova

Romi Savova

The global pandemic has brought a financial vulnerability that we haven’t seen since the 2008 financial crisis.

Market volatility, concerns for our health and safety and the emotional toll of Covid-19, have impacted people of all ages, in all aspects of daily life. However, as recent research suggests, it is undoubtedly the younger generation that has felt the most financial impact. 

Disproportionately affected by redundancy and furlough as a result of three national lockdowns, Brits under 25 have experienced first-hand the importance of financial stability, in a largely unpredictable world.

And, perhaps most critically, they have learned that making informed financial decisions now, can provide invaluable support in later life.

Despite all of the obstacles that have been thrown at them, PensionBee research has revealed a strong sense of resilience and determination in the younger generation.

Our research found that 'Generation Z' savers (18-23 year olds) were more clued up about how much they have in their pensions than their Generation X counterparts (41-54 years old), who have been saving around 30 years longer, and are potentially just a few years away from retirement.

In addition, Millennial savers (24-40 year olds) were found to have contributed the most money to their pensions each month during the last year.

This group in particular seems to have embraced the reduced expenditure on travel and eating out by prioritising saving and redirecting disposable income to their pensions. 

For young savers who may still have their biggest financial transactions ahead of them - such as buying a house, getting married or starting their own business - pensions can often fall down the priority list.

So seeing young people engage with their pensions and start saving from an early age is extremely encouraging. Due to the nature of compound interest, a small savings pot now can turn into a significant amount when left untouched for a long period of time, preventing future disappointment. 

Experiencing the worst global economic crisis since the Great Depression has meant young people have had to learn the hard way the importance of budgeting, paying their most pressing debts and, above all, the lifeline that an emergency fund can bring.

One can only hope that this past year will instill good financial habits for the future in all of us, and that we can learn a thing or two from young savers when it comes to prioritising our pensions. 

Due to increasing life expectancy, those of us working today will be expected to stay in employment far longer than our predecessors, so if we want to retire in our 50s or 60s we’ll need to have built a sizable private pension.

While it’s never too late to start saving, the more we do today, the less we’ll need to do tomorrow, enabling us to look forward to a happy retirement whenever the time comes.