By Jamie Clark, Business Development Manager
Our latest research looks to understand the key influences on millennials’ future long-term pension savings. Here are our top five takeaways to consider when developing a strategy for advising them.
1. Every millennial is different.
One thing that came through loud and clear in our research was that pigeon-holing millennials into one group was not at all helpful. As a result, developing a single strategy was unlikely to have the desired impact. We have, however, identified five broad categories into which millennials fall:
Millennials living at home with their parents into their 30s because they cannot afford to live independently. Nearly half (49 per cent) said that their income held them back from paying more into their pension.1
Younger millennials who are choosing to live at home so that every spare pound can go towards a house. They are most concerned with maintaining their lifestyle (38 per cent)2 and not being able to afford a property (36 per cent)3.
Millennials who live independently but struggle with household bills and have little spare cash to put towards a deposit. Two in five (40 per cent)4 say that they are kept awake at night worrying about paying the bills and over a third (36 per cent)5 say that paying debts is a key concern keeping them awake at night. They have little or no spare cash for pension saving and over a quarter (26 per cent)6 have no savings at all.
Older millennials in a financially strong position, on the housing ladder and able to save some money. Over two-thirds (68 per cent)7 have a pension.
Younger millennial homeowners who find that their finances are more squeezed than those of Measured Homeowners: almost three in five (59 per cent)8 have a pension.
As you can see, arguably the fourth group – Measured Homeowners – will need advice more than the other groups. In particular, mortgage and protection advice might be high on their agenda.
2. They want advice earlier than you may think.
- Nearly a quarter (24 per cent) of millennials want to receive advice at the age of 409
- 18 per cent want to receive advice at 5010
- 13 per cent say they want advice at 6011
As many millennials will be members of their employer’s auto-enrolment scheme, developing a workplace advice service could be one way of tapping in to this desire for advice.
3. They’re unlikely to opt out…
Automatic enrolment into a workplace pension is also very popular with millennials, with nearly three-quarters (71 per cent)12 deciding not to opt out. There is also a high level of acceptance that they will have to pay for their retirement and not rely solely on the state pension.
4. …And want to save more.
Most (75 per cent) millennials who have a pension say they would increase their pension payments automatically in line with a pay rise. Two in five (40 per cent)13 plan to increase their monthly pension contributions next year, and half (50 per cent)14 say their pension is a high priority.
Coupled with low opt-out rates and the realisation that they will ultimately have to be responsible for their own retirement, millennials could be saving more than expected.
5. They’ll all get older…
By the time that they get to the point that they are building up a large pension pot, millennials will need advice — especially perhaps as they start to think about retirement income.
There are positive signs that they understand the need to save more and want to be more engaged with their long-term savings. Bigger pension pots can only be good news for millennials and advisers alike.
1. ‘Pension Through The Ages: The Millennial Mosaic’, Royal London, 2017, p10
2. ibid. p8
3. ibid. p8
4. ibid. p9
5. ibid. p9
6. ibid. p8
7. ibid. p10
8. ibid. p10
9. ibid. p12
10. ibid. p12
11. ibid. p12
12. ibid. p24
13. ibid. p24
14. ibid. p24