Millennial workers* are saving £3,445 per year on average compared to £3,073 by those aged 35-54; 44% think the savings landscape is confusing and that they need guidance.
Millennial workers* are saving more per month than other generations, putting aside on average nearly £400 per year more in non-pensions savings than their Generation X counterparts, according to research from Close Brothers and the Pensions and Lifetime Savings Association (PLSA).
The Lifetime Savings Challenge Report 2017, research, which looked at the views of workers in companies with more than 200 employees found that millennials are saving £3,445 per year, or £287 per month on top of pension savings. Those aged 55 and over save £259 per month, with 35-54 year olds the cohort putting aside the least – £256 per month.
Savings priorities naturally change as employees progress through different life stages and this is clearly visible in the findings, with those in the youngest age bracket prioritising saving for short term events such as holidays (34%), big ticket purchases (13%) or paying down debt (25%), while a third (33%) are prioritising house purchase. More long-term goals come lower down the list. For instance, saving to secure a desired lifestyle in retirement is a priority for just 20% of those aged 18-34 whereas it tops the list of savings priorities amongst those aged 35-54 (34%) and those aged 55 and over (50%).
In spite of their propensity to save, 44% of millennials think the savings landscape is confusing and that they need guidance to ensure they select the best product to place their hard-earned savings. This is exemplified by the Lifetime ISA, the take-up of which has been so lacklustre that the Office of Budget Responsibility (OBR) has reduced their forecast for the cost to government by an average of around 40 per cent a year1. Despite being designed with them in mind, only 4% of 18-34 year olds have a LISA, with around a third (32%) saying that they are likely to open one in the future. However, of the 41% that said they would either be unlikely to do so or didn’t know, 64% cited a lack of information as a main reason. Of those that are likely to do so, 69% saw it as complementary to their workplace pension, with only 18% saying that they would opt out of their workplace pension when they opened a Lifetime ISA.
Jeanette Makings, Head of Financial Education at Close Brothers said: “Millennials are often a prime media target when looking at poor savings habits, but as this research shows despite being the workplace generation that earns the least, they save the most. They also have a great advantage when it comes to long term saving. With expected increases in working life and when looking at the choice from pension freedoms, they are potentially looking at 50+ years of savings and 65+ years of investment performance – a timeframe no other generation can match. But their difficulty is in balancing the shorter term goals such as a house deposit with longer terms ones such as retirement. The generation of most concern is the 35-54 year olds who, without the cushion of a DB pension like the generation before them, and without the time to build up their long-term savings, like millennials, there is the increased risk of them being unprepared for retirement with all the issues that brings for them and their employer.
“Savings priorities and needs vary from person to person and there are a proliferation of savings products and different providers in the market. But none of this is any use unless individual savers have the tools to manage their different savings priorities, find suitable savings solutions and know where to go for help when they need it. This is exemplified by the poor take-up of the Lifetime ISA. While it is certainly important and hugely welcome that the government is looking to tackle the issue of intergenerational fairness, they need to work with employers to make sure that employees know the best ways to achieve their savings goals. By developing comprehensive and targeted guidance in the workplace, employers can build a financially secure, happier, and more productive workforce.”
Nigel Peaple, Deputy Director for DC, Lifetime Savings & Research at the Pensions and Lifetime Savings Association, commented: “In contrast to the usual stereotype of millennials’ savings habits the Lifetime Savings Challenge Report 2017 reveals a very different picture, with these workers putting away more than any other generation. Indeed, PLSA research conducted last year also found this age group had a desire to save, with 51% of respondents telling us they get more satisfaction out of saving money than spending it. “It’s concerning that 44% of millennials find the UK’s savings landscape confusing. The industry and Government must do more to de-mystify savings and make it more accessible to this generation.”
1Office for Budget Responsibility, ‘Economic and fiscal outlook’, November 2017
*Methodology: The data is based on surveys conducted amongst 1,000 employers with 200 or more employees and 2,009 employees from companies with 200 or more employees. The research was carried out on behalf of Close Brothers Asset Management by Opinium between the dates of 16 and 22 August 2017.