UK Millennials need to save £1 million for comfortable retirement

Around £1 million is needed to retire with a similar quality of life to someone with around £24,000 per year in their mid-20s, a new study from Mazars has revealed. The Yorkshire-based professional services firm meanwhile suggested the Millennial generation is not, as it stands, saving for retirement in large numbers. The consequence may be that many will need to work past the retirement age, which, given increased poor health, may become difficult in later life.

Retirement remains a distant prospect for Millennials, and so perhaps unsurprisingly across a new survey from accounting and consulting firm Mazars which took the opinion of 2,000 UK adults, it was found that around a third of Millennial respondents expects their future to involve working past the retirement age. Generation Y were found to place considerably less emphasis on saving for later life, or pensions than other age groups – with a large number of respondents to Mazars’ poll not knowing how they would fund their retirement.

Assuming that the next 30 years do not bring with them long-term radical social-economic upheaval, the consequence of the current attitude towards savings and work in later life – would see around 4 million people over 65 years old continue in the workforce, while many of the others will see their living standards drop dramatically.

The £1 million pension pot

According to the consultancy firm’s research, Millennials hoping to retire on around 50% of their average income will need to save around £1 million beforehand. The calculation is based on the average wage for the age group, with an annual increase of 3.5%, the current life expectancy for the group and a target of 50% of their income for the average rest of their lives derived from savings.

Liz Ritchie, Partner at Mazars and Head of Private Client Services said: “Millennials told us that 63 was their anticipated retirement age; a 24-year-old earning around £24,000 a year today would need £1 miliion to fund their retirement and maintain their standard of living until they were 80 for men, or 85 for women. However, changes to pension structure, the closure of final salary schemes and the erosion of tax benefits have had an effect on the public’s view of pensions which could impact on future generations. A million pounds is a realistic figure and at the same time will be very daunting. This makes it all the more important for Millennials to seek professional financial advice and plan for their future so they can fulfil their life ambitions.”

Working poor and unhealthy

Mazars’ study also notes that, as it stands, the UK has around 1.2 million ‘working retired’, or around one in ten people over the age of 65. This number is set to increase over the next 20 years, as the number of those over 65 is projected to grow to 18 million – with the number working in their final years increasing to 10% of those. The current rate of addition, at 3% last year, could see the number of working retirees double by 2056 – to almost 4 million.

The study also found that the number of people with long-term health conditions is set to rise over the coming decades. With rising food-prices, falling wages, and the shrinking public access to recreational facilities mean a growing proportion of people in the UK live relatively unhealthy lives, consuming poor quality mass produced diets, not exercising, and living with the daily stress of low-paid work.

The number of people with three or more long-term health conditions is expected to have increased by 50% in ten years by 2018 to 2.8 million. Those over 60 are considerably more likely to have such an illness, at 58% of the group compared to 14% for the rest of the population, while uncertainty over the future of the National Health Service, a long-time target for privatisation, means Millennials access affordable healthcare may also be restricted later in their lives. The plan to work into old age may well be scuttled in this case, and the research notes that on average, by the age of 62 for men and 60 for women, health issues will limit the ability to live our lives as before.