Six in 10 millennials are struggling to save for retirement thanks to childcare responsibilities, Phoenix Group has revealed.
The savings and retirement business found millennials – between their late 20s and early 40s – were twice as likely than any other generation to cite childcare as a reason not to save for retirement.
Its survey of around 4,000 adults found that 59% of millennials hoped to save more in the future, compared to 48% of Gen Z workers and 39% of Gen X. A quarter cited income change as the main reason, and a similar proportion said childcare meant they could not budget for retirement contributions.
Pension savings
Only one in five millennials said paying into a pension was a priority. A small proportion said immediate financial pressures had led them to decrease (7%) or stop (7%) their pension contributions in the past year.
Phoenix said that this generation faced a number of “life events” that caused major disruptions in their ability to save. These include taking parental leave, paying for nursery, becoming a homeowner or undergoing a career change or break.
Previous research from the company found that the amount men and women save in their pension starts to diverge from 25 to 34 years old and that gap continues to grow until men are saving 50% more per month than women by 45 to 54 years old.
Patrick Thomson, head of research analysis and policy at Phoenix Insights, said: “The stereotype of the spendthrift generation is all too familiar when it comes to millennial finances, but the reality is far removed from the ‘avocado on toast’ tag placed on them.
“As a millennial myself, I know first-hand the pressures many at this stage face weighing up competing priorities that pull us in different directions. This can lead to day-to-day essentials, such as housing or childcare costs, being prioritised over longer-term savings goals.
He added that the relatively low number of employees pausing or stopping contributions showed the importance of employees being opted into pensions as a default.
“However, there is a risk that if people don’t readjust their savings once they have got through a short-term financial challenge they will reach retirement with much less than they’d hoped for,” he said.
“Employers also play a vital role in supporting their staff to maintain retirement savings at key life stages, including continuing employer contributions during parental leave.”
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