Saving for retirement: it’s one of those tasks we all know is important, but too often put to one side.
After all, it can feel a fair way off, with most of us millennials having several decades to go before we’d even start thinking of hanging up our boots.
All the brain-numbing jargon around products like pensions makes ignoring the issue all the more tempting, as can the need to cover short-term spending priorities, such as household bills.
Millennials are increasingly recognizing the importance of saving for retirement and exploring tech tools that can help simplify the process.
These include Plum, a smart money app that you can download for free via the App Store or Google Play.
Millennials embrace tech tools to simplify retirement saving, overcoming jargon and short-term pressures to secure their financial futures early
Plum is designed to make all aspects of money management simpler and more intuitive.
So below, we draw on their expert knowledge to produce something that’s badly needed – a fuss-free guide to retirement saving for millennials.
We’ll start by looking at the challenge facing many of our generation, before examining some of the handy products on offer.
Finally, we’ll explain why taking action now – aided by Plum – could make all the difference.
Are millennials headed for a pension shortfall?
Working out how much you need to save to fund your retirement is one of the biggest questions out there.
While the answer varies from person to person, the pensions industry body estimates the annual amount required for a comfortable lifestyle – including an annual foreign holiday and several minibreaks – is £43,900 for a single person and £60,600 for a couple.¹
These figures include the State Pension, which at £11,500 per year for 2024-25 is considered only enough to cover the very basics.
Saving for retirement can feel like a long slog – but it could be simpler than you think
Unfortunately, many millennials are worried their retirement savings will not be enough to support the kind of lifestyle they’d like.
In fact, when you ask millennials whether they are saving enough money for retirement, two thirds (66 per cent) say no.² This makes them the most concerned generation, above even Generation Z, on 60 per cent.
SIPP vs LISA: How could they help fund your retirement?
The financial industry loves an acronym, and when it comes to retirement saving there are several key ones.
These include self-invested personal pensions (SIPPs) and Lifetime ISAs (LISAs), which can both be used to save for your later years but work in different ways.
SIPPs are used to invest for retirement and typically hold a range of investments. Lifetime ISAs, by contrast, can be held as either a cash savings account or an investment account (stocks & shares).
SIPP
As the name suggests, a SIPP is a type of pension.
But unlike a traditional workplace pension, you set it up yourself and have more say over what you invest in. You can also choose when you add money, and how much.
SIPPs are designed for people who want more flexibility and are comfortable with making their own investment decisions. Remember that investments fall as well as rise in value, so you could get back less than you invest (capital is at risk).
You can normally only access the money from age 55 (57 from 2028).
Tax treatment depends on your individual circumstances and may change in the future. Before transferring a pension please ensure that you will not lose valuable guarantees or incur excessive transfer penalties. Plum does not provide advice and individual investors should make their own decisions or seek independent advice.
You can save into a SIPP alongside an existing workplace pension, but most people choose to take full advantage of any employer contributions first.
Power in your hands: SIPPs are popular with savers who like to control where their money is invested
LISA
Still with us? Great! Now it’s time to look at Lifetime ISAs (LISAs)…
If you’re under 40, you can take out a LISA to save for your retirement – with the government adding 25% on up to £4,000 you save each tax year up until you reach 50 years of age. Nice!
While you can’t get the government bonus after turning 50, you can still earn tax-free returns on your LISA savings. You can later withdraw this money tax-free once you turn 60, but you’ll lose the bonus if you do so earlier.
Be aware that you may get back less than you paid into your LISA as a 25% government penalty applies if you withdraw money for any reason other than buying your first home or retirement.
Why saving later might cost more
With rising living costs eating up much of our income, ever being able to save enough money to fund a comfortable retirement can feel tricky, if not impossible.
Fortunately, millennials’ relative youth gives us a major advantage – as the longer our money is saved the longer it can benefit from the power of compounding (a fancy name for reinvesting the earnings of investments to buy more of them).
The results can be impressive.
Take someone earning £25,000 who paid the minimum monthly auto-enrolment contributions (5 per cent employee, 3 per cent employer) from the age of 22.
Waiting to contribute to your retirement savings could cost you more money in the long run
Thanks to the amount of time their investments have to compound, calculations suggest they could have a total retirement fund of £210,000 by the age of 68², adjusted for inflation.
But if this person increased their contributions by just 2 per cent aged 30, they could have £252,000 before they turn 68 in today’s prices– a whole £42,000 more.
In other words, it’s important to start saving into your pension now – even if it’s only a small amount.
If you wait until you are older, you could end up having to pay in more than if you started sooner.
How smart apps like Plum can help
The figures above show how small, regular contributions can mount up over time.
Apps like Plum could help you boost your retirement savings through the power of automation.
The app connects to your bank account and works out how much you can afford based on your incomings and outgoings. A lot of Plum customers have found that they’ve ended up with more savings than they thought possible.
You can then consider taking advantage of opportunities to boost your savings, such as by opening a Plum SIPP.
Apps like Plum could help you boost your retirement savings through the power of automation
These are quick to set up, and you can transfer any existing pensions within the Plum app in a few simple steps. You can open a SIPP without paying subscription charges, although other fees apply*.
The SIPP offers a wide choice of investments to suit all kinds of investors (capital at risk).
That includes the Target Retirement Date Fund, which will automatically adjust how your money is invested as you near your specified retirement age – reducing risk as you get closer to retirement.
And if – after doing some research – you decide you’d like to open a Lifetime ISA to hold some of your retirement savings, doing this with Plum couldn’t be easier.
Simply head to the app and answer a few quick questions (including one checking that you’re aged between 18 and 39).
How Plum keeps your money safe
You work hard for your money, so you’ll want to ensure every penny you put away is protected.
Money held in a Plum Easy Access Interest Pocket, Lifetime ISA or Cash ISA is covered by the Financial Services Compensation Scheme (FSCS) up to a total of £85,000 per customer per our banking partner. Learn more about how your money is protected here.
There are also protections for a non-interest earning pocket, like a Primary Pocket, which is covered by the E-Money Safeguarding Rules.
The Plum app also supports encryption and face and fingerprint ID for added security. And if you ever need help, their friendly customer support teams are available 7 days a week.
Click here for more information on how your money is protected with Plum.
Try Plum TODAY by downloading it for free from App Store or Google Play.
This content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.
¹ Pensions and Lifetime Savings Association: retirementlivingstandards.org.uk
² Perrin, Paige. 2025. ‘Two Thirds of Millennials Worried About Not Saving Enough for Retirement.’ Pensions Age Magazine, February 18.