Young adults in their 20s believe they will not be able to rely on a state pension in the future, according to research by Royal London.
More than half (56 per cent) expect to have to wait until they are over 70 years of age before they can claim state pension.
With a projected state pension age for those in their 20s of 68, this would see them overshoot that by at least two years, the pension provider said.
Retirement is clearly a long way off for younger workers, but many are sceptical to what extent, if at all, the state pension will be available to them as part of their overall retirement income.
Nearly four in 10 (37 per cent) think the criteria for eligibility will change by the time they retire.
Around a third (30 per cent) believe the state pension will not exist by the time they retire, while half (50 per cent) expect it to be less generous.
Pensions expert at Royal London, Clare Moffat, said: “For workers in their twenties, retirement is likely to be one of the last things on their mind with more pressing financial priorities like the cost-of-living crisis and paying bills, saving for a house or even a car, occupying their thoughts.
“But concerns about when and how much state pension will be available might lead to an expectation that they’ll need to self-fund a greater portion of their retirement.”
“Future financial security is likely to mean working for longer than previous generations and also saving more,” Moffat added.
The amount of state pension someone receives is dictated by their national insurance record, but three quarters (74 per cent) of those surveyed were unaware that receiving the full state pension currently requires 35 years of national insurance contributions or credits.
The survey was conducted by Opinium in June with a sample of 4,000 UK adults, including 462 twenty somethings.
Changing lifestyles
For today’s young adults, life and long-term financial planning looks very different to the journey their parents took, Royal London explained.
Reaching key financial milestones, like buying a house will involve a much longer wait, as will retirement.
The absence of generous employer sponsored final salary schemes which guarantee an income in retirement also means that financial security in retirement is increasingly in their own hands.
For most people, the state pension will provide the foundation on which they build their retirement plans, Royal London explained.
However, those relying solely on the state pension need to be aware that at the current level of around £9,600 a year is only going to stretch to essential needs.
It also falls short of the ‘minimum level’ of retirement income for an individual, £10,900 a year, set out by the Pensions and Lifetime Savings Association’s retirement living standards, which classifies an annual income of £20,800 a year necessary for a ‘moderate’ lifestyle.
Royal London said this all points to a greater need for self-sufficiency if future retirees want to enjoy a comfortable standard of living and avoid a savings gap in retirement.
Moffat said: “The good news is that there’s a long-time horizon in which to not only develop positive savings habits but benefit from growth through compound interest.”
sonia.rach@ft.com
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