Gen Z have big retirement dreams - but are failing to plan how to pay for them

It’s important to start early so that compounding does the heavy lifting for retirement savings

SPONSORED BY TRADING 212

The Independent Money channel is brought to you by Trading 212.

For Gen Z, retirement is not about slowing down. It’s about freedom.

Travelling the world, buying a holiday home and starting a new creative chapter all feature heavily in how young workers imagine later life.

New research shows those ambitions are clear, but not matched by how Gen Z are saving and investing today.

A poll of 2,000 working adults commissioned by Skipton Building Society found more than a quarter, 27 per cent, of Gen Z want to invest their pensions into experiences rather than possessions, while 16 per cent dream of moving abroad in retirement.

But despite these aspirations, a third (33 per cent) admit they have no idea how much they are currently contributing to their pension each month.

Aspirations racing ahead of planning

The emotional gap is already evident. While nearly two-thirds (61 per cent) of Gen Z say they would be devastated if they could not achieve their dream retirement, pension saving remains a low priority.

Standard Life’s Retirement Voice 2025 report shows only 13 per cent of Gen Z consider pension saving a top financial goal. Day-to-day finances, saving for holidays and buying property all rank higher.

More than a third (35 per cent) say they would rather “live for today than plan for tomorrow”, while 23 per cent admit they are not focused on retirement saving because they expect to inherit money or property.

(Getty Images)

Helen McGinty, head of financial advice distribution at Skipton Building Society, says there is a worrying disconnect. “Young people clearly have big dreams for retirement - from travelling the globe to starting entirely new chapters of their lives,” she says.

“But right now, too many are walking blindly into the future. With many not knowing how much they’re contributing each month to their pension, yet saying they’ll be devastated if they couldn’t achieve their dream retirement.

ADVERTISEMENT

ADVERTISEMENT

“Gen Z need to wake up to the reality that those dreams won’t happen without planned and considered action.”

Auto-enrolment complacency

One reason Gen Z may be under-preparing, is overconfidence in auto-enrolment. Nearly six in 10 (59 per cent) believe being automatically enrolled into a workplace pension means they are saving enough.

The figures suggest otherwise. Standard Life modelling shows that someone starting work on £25,000 and contributing the minimum eight per cent from age 22 could build a pension pot of around £210,000 by age 68.

Increasing contributions to 10 per cent could boost that to £262,000 - an extra £52,000 - largely due to compound investment growth over time.

Mike Ambery, retirement savings director at Standard Life, says minimum contributions are unlikely to support the lifestyle Gen Z expects.

“Our research shows Gen Z are ambitious about retirement, with many hoping to stop working at 60 and enjoy later life to the full. However, there’s a clear gap between those aspirations and current saving habits,” he says.

“Only a small minority prioritise pensions, and many assume minimum auto-enrolment contributions will be enough which, for most, is unlikely to deliver the retirement they expect.”

Investing - but not where it counts most

Gen Z are not avoiding investing altogether. In fact, they are often more comfortable with it than older generations - just not always in the most effective places.

Standard Life found that 25 per cent of Gen Z have invested in stocks and shares, and another 25 per cent in cryptocurrency. Almost half (48 per cent) say they are comfortable taking financial risks for higher returns, compared with just 14 per cent of Baby Boomers (those now aged roughly 60-80).

(Getty Images/iStockphoto)

Many also rely on digital sources for guidance, with 15 per cent using AI tools and 22 per cent turning to social media for retirement advice.

The issue for Gen Z, Ambery argues, is not appetite, but direction. “This appetite for higher-risk investing can be positive, but it needs to be balanced with long-term planning. Pensions remain one of the most effective ways to build wealth over time, thanks to employer contributions, tax relief and the power of compound growth.”

Spending early, retiring early

Gen Z also expect to retire earlier than any other generation, with an average target age of 60 - well ahead of the state pension age, which is rising to 67 by 2028.

At the same time, a quarter of people surveyed expect to spend more of their pension early in retirement. Six in 10 want to enjoy it while they are still fit and active, while a third believe they will not need as much money as they get older.

“Understanding how long your retirement might last, and how your money will need to stretch across that time, is crucial,” McGinty says. “Without a clear picture, it’s easy to underestimate how much you’ll actually need to fund the lifestyle you’re imagining.”

For now, they are investing, just not always in the places that will matter most. And unless more of that confidence finds its way into long-term pension planning, the retirement they imagine may prove harder to afford than they expect.

When investing, your capital is at risk and you may get back less than invested. Past performance doesn’t guarantee future results.