Millennials unprepared for retirement
Recent research from the University of Cambridge and BNY Mellon suggests that many young people are not getting the right information about saving for their future from their workplace or education provider, leaving them unprepared for retirement.
The research into the financial behaviour of people born between 1980 and 2000, from six countries including the UK and USA found that nearly 50% said they were making a “blind guess” when estimating the size of pension they’ll need. Just one in ten people in the UK understood pound cost averaging – the process of regularly investing the same amount, usually monthly, in order to smooth out peaks and troughs in the chosen investment.
Whilst there are plenty of tools available online for working out how much you will need to save now to generate enough income for retirement, it seems young people aren’t using them. 90% admitted they didn’t use industry data to estimate the amount they will need to retire, and 75% said they wanted a phone app to compare themselves to others.
Paul Kelly, joint lead researcher for the study also pointed out that there was a popular misconception that millennials are interested in spending their money quickly, but the researched showed that was not the case.
“They take that financial responsibility seriously, and 77% want to be told about their financial health and post-retirement finances.” He also noted there was a sense of frustration among millennials, over issues such as student debt and saving for a home.
Young people it seems are hungry for information and employers should be doing more to educate them on their financial well-being for the future. Pensions are something all young people need to be thinking about as the more they save now the better prepared they will be for their retirement.
Employers need to guide and support their staff, pressing upon them the importance of saving for their retirement. A financial education programme in the workplace or retirement and pension communication would be a step in the right direction and help younger employees make the right financial decisions about their future.
As we are an ageing nation that is also living longer this isn’t just a priority for the individual but for society as a whole, otherwise the cost of looking after people is going to become a huge and possibly unmanageable burden for everyone.
By Darren Laverty, Partner, Secondsight.