Generation Z will need more than £3million in their pension pots in order to retire ‘comfortably’ analysis claims.
A current 25-year-old will require £3.1million saved in their pension by the time they reach retirement at 65 to lead a comfortable life, according to figures from Rathbones, highlighting the effect of inflation over the next 40 years.
Currently, pension savers need £1.4million in their pot for a ‘comfortable’ standard of living, according to definitions from the Pensions and Lifetime Savings Association.
This means young people will need to save approximately £1,600 per month, or £19,200 per year, assuming contributions rise by 2 per cent each year and the pot grows at 5 per cent.
For a couple, this figure rises to £4.3million, compared with £1.9million today, but means a lower amount of saving is required for each member of the couple.
Rathbones accounted for a 2 per cent annual inflation rate over the 40-year period, with the pension pot enough to fund 25 years of retirement.
Gen Z refers to people born between 1997 and 2012.
For what the PLSA deems a ‘moderate’ retirement, today’s Gen Zs will need to build a pot worth £2.2m, and a couple will need £3.1 m
While the analysis doesn’t account for the state pension, which currently pays £11,973 per year, it also doesn’t include other costs like rent., mortgages and social care.
Rebecca Williams, divisional lead of financial planning at Rathbones, said: ‘The figure is shocking and serves as a stark reminder of how inflation can quietly erode retirement savings.
‘What’s considered an adequate retirement nest egg today may barely scratch the surface of what Gen Z will need when they retire.’
On top of this, with a rising cost of living, higher housing costs and student debt, younger people are finding it harder than ever to save for retirement.
‘While a comfortable retirement means different things to different people, younger generations face higher hurdles – from high housing costs to student debt – while also needing to ensure their savings stretch further to account for greater longevity,’ Williams said.
For what the PLSA deems a ‘moderate’ retirement, today’s Gen Zs will need to build a pot worth £2.2million, and a couple will need £3.1 million – the same amount needed for a ‘comfortable’ retirement for a single person.
This includes £56 per week on groceries, and £32 per week on meals out, compared to £75 per week on groceries, and £42 per week on meals out for a comfortable retirement.
For a ‘minimum’ standard of retirement living, equating to income of around £22,000 annually in today’s terms, young savers will need a pot worth almost £1million, at £947,000.
For a couple, some £1.5million would be needed for the minimum pot.
Currently, the average pension pot of someone in their sixties is just £228,000 for men and £152,600 for women, well below even the amount required for a minimum standard of living in 2025.
Williams added: ‘With final salary schemes fading into history, the responsibility for retirement savings increasingly falls on individuals.
‘Auto-enrolment has helped lay the groundwork, but minimum contributions often fall short – especially for those in irregular or gig economy roles, where pension gaps are common.
‘Frequent job changes can also leave savers with scattered, forgotten pots.
‘Starting early and saving consistently is key; even modest, regular contributions can grow substantially over time.
‘With a longer investment horizon, younger savers can typically afford to take on more risk, potentially boosting returns.’
> How to start a pension from scratch: It’s (almost) never to late to save for retirement
DIY INVESTING PLATFORMS
AJ Bell
AJ Bell
Easy investing and ready-made portfolios
Hargreaves Lansdown
Hargreaves Lansdown
Free fund dealing and investment ideas
interactive investor
interactive investor
Flat-fee investing from £4.99 per month
InvestEngine
InvestEngine
Account and trading fee-free ETF investing
Trading 212
Trading 212
Free share dealing and no account fee
Affiliate links: If you take out a product This is Money may earn a commission. These deals are chosen by our editorial team, as we think they are worth highlighting. This does not affect our editorial independence.