M&G research: optimistic Gen Z twice as confident in financial futures than mid-lifers

New research from M&G, a leading savings and investment firm, has revealed that Gen Z (18–24-year-olds) are currently the most financially optimistic generation, and feel significantly more positive about retirement than millennials and baby boomers. 

While many Brits approaching retirement have a sense of financial unease, Gen Z appear far more upbeat. Around half (47%) of 18–24-year-olds are confident they’ll have enough money saved to live the life they want in retirement, compared to 29% of 25-34-year-olds and only a quarter of 45-54-year-olds. 

The research comes as part of M&G’s Reframing Retirement campaign which challenges outdated perceptions of retirement to encourage people to financially plan for their future. Of those who have not started to plan financially for their retirement, 62% say they do not plan to start until they are at least 40 years old, risking saving ‘too little, too late.

The new research also revealed that Gen Z worry less about running out of cash in retirement compared to other generations. Only 30% of 18–25-year-olds cited this as a concern, compared to 44% of 25–34-year-olds and 52% of 35–44-year-olds. These figures suggest that while Gen Z are still relatively carefree, millennials who are beginning to gain life and career experience, are finding themselves grappling with conflicting financial priorities amidst rising living costs and a challenging economic environment. The implication being that many may find it difficult to sufficiently save for their financial future due to many demands on their time and money.

Yet while confidence among younger savers is promising, it raises an important question – are Gen Z’s optimism and expectations grounded in the financial realities of retirement? 

While Gen Z may feel optimistic about their financial futures, this confidence could be due to who they role model their retirements on. Notably, 51% of 18-24s said friends and family were who they most looked to for advice on preparing for retirement – outstripping other age groups by some margin. And yet compared to their parents and grandparents, Gen Z faces new challenges due to saving through defined contribution schemes and different financial pressures, such as getting on the housing ladder later in life.

Without proactive saving and regular reviews, there’s a real risk that Gen Z could face a financial shortfall in retirement compared to their parents and grandparents. When quizzed about their top financial priorities, only 8% of 18-24 year old’s included building a pension pot, compared to almost half (49%) who named spending money on things they enjoy.

In fact, when it comes to planning for the longer term, almost half of Gen Z (47%) don’t have a workplace pension and 44% don’t have any investments. Yet 20% expect to retire between the ages of 50-60 when the state pension age will be 68 by 2044. 

That’s why, working with the Social Market Foundation, Britain’s leading non-partisan think-tank, M&G have tested policy measures and believe a regular ‘Pension Check-Up’ can help people take timely action on retirement planning.

The research reveals the desire for a ‘Pension Check-Up’ is consistent across all age groups, with demand particularly high in younger demographics. 42% of 18- to 24-year-olds said a one stop shop view of their retirement pot would help them take action, suggesting this measure could be the key to matching Gen Z’s optimism with their retirement reality.

Anusha Mittal, Managing Director of Individual Life and Pensions at M&G, said: “It’s refreshing to see such positive attitudes from Gen Z towards their financial futures, but optimism alone isn’t enough to guarantee a comfortable retirement. This is a generation who are unlikely to have yet faced significant financial pressures like mortgages, children and ageing parents and are just starting out in their careers. With life events like these happening later and later, younger generations are already expected to work for longer than their parents and grandparents.

Unless Gen Z’s enthusiasm is matched by action – including better understanding of where their money is going, how much they’re saving, and whether it’s enough – they could be sleepwalking into a ‘too little, too late’ scenario when it comes to retirement readiness.

Too many young people still lack a clear understanding of how much they’ll need to save, where to start — or how to get there. That’s why we believe financial planning support needs to start much earlier in life. A routine ‘Pension Check-Up’ could be a simple but powerful tool to help people of all ages take control of their retirement plans before it’s too late.”

For more information on M&G’s Reframing Retirement campaign, visit: Reframing retirement – M&G plc