A fifth of Millennials think there will be no state pension when they retire

And yet they’re still failing to protect themselves

Updated: 
Sterling Pension Savings in the UK. A Ten Pound sterling bank note with a pound coin and a ballpoint pen, with focus on the word

A fifth of all Millennials think that by the time they get to retirement age, there will be no such thing as a state pension. More than half of these 18-30-year-olds admitted they were completely clueless about how much the state pension is currently worth, and when told it would be £155.65 a week, two fifths said it wasn't enough to retire on.

Even if the state pension doesn't die out entirely, analysis by the Pensions Policy Institute reveals that it's going to be much less generous for younger people. Approximately three quarters of people in their twenties are set to lose a notional average of £19,000 over the course of their retirement, while around two thirds of people in their thirties will lose an average of £17,000.

Not saving

The figures, from NOW: Pensions, revealed that despite the fact that they don't think they can rely on the state, young people aren't making any plans for themselves. Only a third are currently paying into a workplace pension, and of those who are saving, less than 10% know how much they are putting in.

They haven't a clue how to save either. When asked about the best ways to save for retirement, 26% say they "don't know", with 10% thinking that putting money in a bank account is the best way. The Lifetime ISA, due to launch next year, was one of the least popular options with only 5% thinking it's the best way to save for retirement.

Will auto-enrolment solve this?

Morten Nilsson, CEO of NOW: Pensions, is optimistic, saying that rules that automatically bring people into a workplace pension will help protect people from their own inertia. He explains: "Auto enrolment will bring a much larger proportion of the younger generation into workplace pensions, allowing many more to take control of their retirement saving, helping to protect themselves against an uncertain future."

However, there are some serious question marks over whether this will be enough. At the moment, people are automatically enrolled in their workplace pension when they earn £10,000 a year or more - unless they choose to opt out. Employee and employer contributions are then based on a band of earnings between £5,824 and £43,000. The legal minimum contribution is 2%, including 1% from the saver, up to April 2018. This then rises to 5% (3% staff contribution), then 8% (5% from staff) from April 2019 onwards.

However, even at 8% this will fall short of what people need. The Pensions Policy Institute says there is less than a 50% chance that people contributing at this level will be able to retire on two thirds of the income they had when they were working (considered sensible for a comfortable retirement).

If the state pension was to remain in place - but the triple lock was axed - this would fall to a one in four chance, and without the state pension, it would destroy the vast majority of people's chances of a comfortable retirement through auto-enrolment alone.

At the moment, therefore, the future looks decidedly uncertain for younger people. There's a good chance that many of them will be able to close the gap by working well into their 60s and 70s. The question is whether this is what they really want their retirement to look like.

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