Rising housing costs and student loan repayments are the main two financial hurdles that young adults born between 1997 and 2012 face when planning for their post-working life, according to the Pensions Policy Institute’s (PPI’s) report.
Those two factors that many younger workers face are being seen as the priorities for savers, as opposed to the longer-term concern of a retirement fund.
More workers are also employed on short-term contracts, like delivery drivers, while seven in 10 employees under 26 years old are considering or already have freelance careers.
There is also too much reliance on defined contribution pension schemes, which could be at risk if an employee experiences financial difficulty, according to the The Concerns of Gen Z report, commissioned by the Institute and Faculty of Actuaries (IFoA).
Further, just under half (46%) of the cohort surveyed said they did not think the state pension would still be running when they retired.
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A similar number of Gen Z respondents are planning to work part-time hours rather than retiring fully when they reach state pension age, which is set to rise to 67 between April 2026 and March 2028.
By the time Gen Z retire, the state pension age will reach 68 years old. Of those retired, 76% said they stopped working completely once they reached retirement age.
While pensions are not seen as a priority for younger savers, ISAs are proving popular among younger people, with those aged between 18 and 24 stashing away £410 per month on average.
That’s £100 more than the generation aged between 45 and 54.
‘Vastly different financial landscape’
Shantel Okello, policy researcher at PPI and author of the report, said: “Gen Z is navigating a vastly different financial landscape from previous generations, with high housing costs, student debt, and insecure work limiting their ability to save for retirement. The rising cost of homeownership means that fewer young people are accumulating housing wealth, increasing the likelihood of renting in later life.
“At the same time, the increase in reliance on DC pensions has transferred much of the risk onto individuals, leaving many Gen Z savers exposed to the potential for inadequate retirement incomes.
“If policymakers and industry leaders want to improve outcomes for Gen Z, urgent action is needed to address barriers to pension saving.”
Okello added: “Expanding access for gig workers and the self-employed, reassessing contribution adequacy, and modernising communication strategies could help build a system that better reflects modern working lives.
“Without meaningful reform, there is a risk that a growing proportion of young people will reach retirement without the savings necessary to maintain an adequate standard of living.”
The Gen Z cohort is also living longer, which means more time to work to contribute to a sizeable retirement pot. However, this also means any savings will need to last longer than previous generations had to plan for.
Alexandra Miles of the IFoA Pensions Gap working party said: ”Traditional retirement models are becoming increasingly unsustainable and the burden of having the funds needed in later life is now firmly on the individual saver, especially for this generation, where defined benefit pensions will not be an option for the vast majority.
“The current rigid life-stage model will need to shift to a far more fluid, adaptable approach where retirement is redefined as an evolving phase rather than a fixed endpoint.
“Industry, regulators and policymakers all need to play our part in addressing this shift, ensuring financial security, purpose, and wellbeing for all throughout our own unique and un-sequential lives.”
