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Old Age Pen-shunners – why saving for retirement needs to be a Milennial habit

Millennials across the UK have set themselves an ambitious savings target of over £300K before they retire, a figure they believe will grant them ‘comfort’ in their golden years, with many aspiring to travel the world, own a second home and eat out multiple times a week.

However, if they want to make these future goals a reality, new research from Barclays suggests they need to super-charge their saving as the typical millennial currently puts aside £200 a month or less, with a fifth saving nothing at all. Based on these saving habits, the reality is that it will take 125 years to reach their retirement fund target, long after turning 56, when the average millennial plans to retire. If they are to accomplish this goal, then they need to start saving more regularly and from today, as Jonathan Sloan, Barclays Wealth & Investments Northern Ireland, explains:

“It’s great that millennials have given themselves a target, as it shows they are thinking about their long-term futures. We know it’s often tempting to put off saving for retirement – it can feel like an age away and not a priority when you’re in your twenties and already under pressure to make ends meet. But the sooner you can start putting money away, the better.

“Whether it’s starting to put money aside in a cash ISA, an investment ISA, or saving for a house deposit through a Help-To-Buy ISA, there are plenty of options to help today’s millennials in Northern Ireland plan for their dream retirement. Barclays is here to support that ambition and we have a range of competitive products to help them on that savings journey, as well as an experienced team in any of our nine local branches. We urge millennials to make the most of their ISA allowance before tax year end on April 5th.”

The consequence of not saving early 

In a parallel study of 1,000 retirees[1], two thirds (60 per cent) admitted that they did not save enough earlier in life and are now struggling to make ends meet. Based on a reluctance to make cut backs and instead focus on short term desires, the research shows that millennials are also set to struggle financially in later life.

The average millennial saving £200 a month can realistically expect to have £52,800 by the time they reach their ideal retirement age. This means that the half of millennials hoping to one day own a second home and travel the world are going to struggle in the future, unless they start changing their savings habits today.

Habits that could de-rail millennial retirement ambitions
54 per cent of millennials claim they don’t save because it would negatively impact their social lives
86 per cent plan to continue going on lavish annual holidays
54 per cent plan to continue going to restaurants and going on nights out
45 per cent said they couldn’t live without their TV, fashion and food subscriptions
A fifth (21 per cent) plan to continue ordering takeaway food regularly
A fifth will keep buying their morning coffee
A fifth plan to keep attending expensive music festivals

The harsh reality of overspending

As the table below demonstrates, even the more modest ambitions of eating out, going on an annual cruise, having a weekly trip to the cinema and holding a gym membership could make a real dent in your retirement savings, currently costing an average of £10,600 a year. Not including other financial commitments, based on current costs and projections, this could mean millennials run out of money just four years and nine months into their retirement.

HOW FAR WILL £52,800 GET MILLENNIALS BASED ON THEIR AMBITIONS?
MILLENNIAL ASPIRATIONCOST REALITY
A third of millennials aspire to eat out twice a week£5,946.72 for a couple per annum[2]
Two fifths fancy going on an annual cruiseAverage cost £3,500 for a couple per trip[3]
Two fifths would like to go on weekly trip to the cinema£778.96 for a couple per annum[4]
A fifth would like to retain their gym membership£384 per annum[5]

“If millennials want to achieve their later life ambitions, it’s critical they start planning today and make the most of the support available. For instance, two-fifths currently ignore their work pension schemes, which alone could be damaging to their future finances and something we recommend they consider.

“But there are plenty of other options available to them. ISAs are tax free and benefit from competitive interest rates, so can often be a sensible financial decision. For those with a little more in the bank, the Barclays Smart Investor investment ISA could be a great way to make your savings work harder. Whatever they decide, we strongly recommend millennial savers consider all options before April 5th to start paving the way for their dream retirement. If you have any questions, our local team are on-hand to help in any Barclays branch.”

To assess your current retirement savings trajectory, check out the Barclays retirement income calculator: https://www.barclays.co.uk/savings/retirement-calculator-tool/

If you’re interested in making your savings work harder, consider Barclays’ range of Cash ISAs and Investment ISAs by accessing the links below:


[1] Those polled were 65+

[2] Based on average cost of meal for two people twice a week as provided by Horizons in 2017 – https://www.dineindulge.co.uk/news/the-cost-of-eating-out/

[3] Average cost of a cruise according to Cruise critic – https://www.cruisecritic.co.uk/articles.cfm?ID=759

[4] According to the UK Cinema Association – https://www.cinemauk.org.uk/the-industry/facts-and-figures/uk-cinema-industry-economics-and-turnover/average-ticket-price/

[5] According to a 2017 study by Klick Fitness – http://www.thisismoney.co.uk/money/bills/article-2063195/The-new-gym-price-battle-costs-drop-12-month.html