State Pension  

Millennials urged to consider pension saving

Millennials urged to consider pension saving

Millennials spend £1,770 a month on average, more than twice as much as the annual state pension allowance they are likely to get, according to research.

Pension adviser Profile Pensions found millennials spent the equivalent of 242 per cent of the monthly state pension allowance each month, with a chunk of this going towards takeaways or a night out.

The adviser based this on a state pension of up to £168.60 per week, as of April 2019, which equates to about £730 a month.

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This compares to a £1,200 monthly allowance from a modest pension pot, which is 32 per cent less than millennials spend, and £2,371 from a comfortable pension, which is 34 per cent more than millennials spend.

If millennials cut the amount spent on nights out by half they would have an extra £100 each month that they could put into a private pension instead, the adviser stated.

The research showed on average, the largest proportion of millennials’ spend went on rent (£772). This was followed by nights out (£212), groceries (£206), and utility bills (£143).

Total monthly spend was calculated by adding together the individual average monthly expenses of a millennial, while the monthly pension was calculated using Profile Pensions' own calculator.

Michelle Gribbin, chief investment officer at Profile Pensions, said: "Although monthly expenses can vary from generation to generation, we wanted to showcase to those still climbing the career ladder the necessity of preparing for their financial future early, by highlighting just how much of their current lifestyles they would have to change in order to live comfortably in retirement."

Kay Ingram, director of public policy at LEBC, said there needs to be a balance between saving for retirement but also enjoying life and paying for other expenses.

She said: "If we were to advise all our millennials clients to stop going out and not have any takeaways but instead to save this money into a pension scheme, then life would be very boring.

"Instead millennials could cut back on one night out each month and consider putting the money saved towards their pension or even to save for a deposit on a house."

She added people need to think about saving for retirement sooner rather than later as in later life when they have more money to save pension tax rules could hinder how much they can contribute to their pension pot.

"The money individuals put in their pension pot now will earn them a lot more in compound interest than the money contributed in their 50s," she explained.

"Due to pension legislation, it would be a mistake for someone to put off saving into a pension until they are much older and earning a higher wage. This way they could be subject to the tapered allowance which could make them unable to save more than £10,000 a year."

Introduced in April 2016 by George Osborne, the tapered annual allowance means that for every £2 of adjusted income over £150,000 the amount of tax-relieved pension saving made by an individual or their employer that year is reduced by £1, down to a minimum of £10,000.