A growing number of young adults believe they will need more than £100,000 a year to enjoy a comfortable retirement, according to new research from Royal London.
The study found that more than one in eight people across the UK (13%) think a six-figure annual income is necessary for a good standard of living in later life. That figure rises sharply among those aged 18 to 34, with more than one in five (22%) expecting to need at least £100,000 a year.
This contrasts with the latest Retirement Living Standards from industry body Pensions UK, which estimate that a single person requires £43,900 a year for a ‘comfortable’ retirement, excluding housing costs.
The findings are published in Royal London’s latest report, Workplace Pensions – How much is enough?, which reveals a significant generational divide in retirement expectations. Only 3% of people aged 50 to 69 believe they would need as much as £100,000 a year for a good standard of living, underlining a sharp contrast between younger and older savers.
The research comes ahead of an expected tax-raising Budget, amid speculation that future reforms could reshape long-term savings and pension planning.
More than a quarter (26%) of respondents said they felt anxious about their financial readiness for retirement after checking their pension balance. Meanwhile, 15% said they felt it was either too late or too early to make meaningful changes.
Despite these concerns, more than half (52%) of employees with a workplace pension have never sought professional guidance or advice about it. Only 27% have done so in the past year, and 17% more than a year ago.
Clare Moffat, pension and tax expert at Royal London, said: “It’s clear that younger adults think they’ll need significantly higher income when they’ve finished work than those closer to retiring. This could be driven by their cost of living and inflation expectations, and also because young people face greater housing uncertainty than those before them.”
HIGHER HOUSING COSTS DRIVE EXPECTATIONS
Almost half of younger adults (48%) expect to still be paying rent or a mortgage in retirement, compared with one in three (33%) of those aged 50 to 69. Younger people also intend to retire earlier – at an average age of 59 – placing greater pressure on them to save enough to sustain their expected lifestyle.
Moffat said: “With such a wide gap in generational expectations, it’s easy to suggest pension expectations are overblown, but for a generation that’s experienced multiple economic downturns and high inflation, many will be concerned for their future quality of life.
“Many younger adults are questioning whether their State Pension and personal savings will be sufficient to meet their future needs, and they have to balance current costs against future pension expectations. Breaking down barriers to guidance and advice, especially in relation to cost and trust, will be essential to tackling generational divides.”
GENDER GAP REMAINS WIDE
Across all age groups, the study also highlights a marked gender gap in expected retirement income. Men anticipate needing between 18% and 30% more than women for a good standard of living.
Among younger adults, men estimate they will need around £81,300 a year compared with £69,000 for women. Among those approaching retirement, men expect to need £38,900, while women expect £31,800.
Moffat added: “Lower expected retirement income among women may reflect concerns around pension adequacy, shaped by earnings gaps and time out of the workforce. This is an issue that will be looked at by the recently formed Pensions Commission.
“Women may also take a more cautious view of retirement needs, influenced by greater cost of living pressures. Whatever the cause, the disparity highlights the need to address some of the specific challenges women face when planning for retirement.”
