- 42 per cent of Gen Z workers could face retirement poverty at minimum auto-enrolment levels.
- Younger savers are prioritising flexible options such as cash savings and ISAs.
- Pensions dashboards could make retirement savings easier to track.
For a generation that says it wants financial freedom and the option to retire earlier, saving enough for retirement is becoming a difficult balancing act.
More than two-fifths, or 42 per cent, of Gen Z workers are on track for retirement poverty if they remain at the minimum auto-enrolment contribution level of 8 per cent of qualifying earnings, according to research from workplace pension provider Penfold.
The finding highlights a growing gap between what younger workers want from their financial future and where their savings are currently heading.
Retirement is competing with more immediate goals
For many younger workers, putting more money into a pension means having less available for expenses that feel more urgent today.
High housing costs, saving for a deposit and wider cost-of-living pressures can all compete with retirement contributions. Penfold said younger people also tend to favour savings options that are easier to access, including cash savings and ISAs.
Analysis from JPMorgan Asset Management has similarly found that Gen Z investors often prioritise ISAs over pensions because of their accessibility and flexibility.
The attraction is understandable. Money held in an ISA can generally be accessed before retirement, while pension savings are designed for the longer term.
That creates a particular problem for younger workers. They may want the financial freedom to retire earlier, but the money needed to make that possible has to compete with financial goals that are much closer.
Penfold co-founder Chris Eastwood reportedly said pension planning often asks Gen Z to prioritise a future that is decades away while they are dealing with rent, home saving and the rising cost of living.
“Many younger people already know financial security is important and aspire to achieve greater financial freedom, including earlier retirement than previous generations,” Eastwood reportedly said.
He argued that pensions need to be made simpler and more closely connected to the financial goals younger people are already working towards.
Could seeing the money change the way Gen Z saves?
One issue is visibility. A pension can feel distant when the only evidence of progress is an annual statement or a figure buried inside a provider's app.
Penfold has argued that technology could make it easier for younger workers to understand what they have saved and what their current contributions could mean later in life.
The planned pensions dashboards could play a role here. The UK system is designed to allow people to see information about their pensions, including their State Pension, in one place online. Pension schemes in scope are required to connect to the dashboards ecosystem by October 31, 2026.
That does not automatically mean people will save more. But having a clearer view of multiple pension pots could make retirement planning less abstract, particularly for younger workers who may change jobs several times during their careers.
The bigger challenge is therefore not simply getting Gen Z into pensions. Auto-enrolment has already made workplace pension saving much more common. The question is whether younger workers will increase their contributions as their incomes rise, rather than remain at the minimum level.
For Gen Z, retirement may still be decades away. But the amount saved in those early working years can have a long time to grow, making the decisions taken now increasingly important.
