And while baby boomers \u2014 those born in the post-war years until the mid-1960s \u2014 enjoyed average wage growth of 4.8 per cent in June, Gen Z workers\u2019 pay fell 0.2 per cent, according to the monthly jobs report by Employment Hero, a payroll software company.<\/p>\n
Plus university graduates face increasingly uncertain career prospects due to the rise of AI. The number of new entry-level jobs has fallen by nearly a third since the launch of the artificial intelligence tool ChatGPT in 2022.<\/p>\n
Then there is the colossal task of saving for a first home. Based on historical trends, about 7.2 million people would have been expected to buy their first home since 2006, according to research by the Building Societies Association, a trade body, but only 5 million have achieved homeownership in that time.<\/p>\n
Research from the estate agency Hamptons found that first-time buyers made up a record 33 per cent of all buyers in the first half of this year, but they are having to stretch to get on the ladder.<\/p>\n
The average home costs \u00a3223,670 for a first-time buyer, Hamptons said, up from \u00a3143,720 in 2007. Typical monthly mortgage payments, assuming a 10 per cent deposit and a mortgage rate of 4.78 per cent, would be \u00a31,054 \u2014 equivalent to 40 per cent of the average worker\u2019s income.<\/p>\n
It\u2019s even worse for renters<\/a>. The average rent is 53 per cent of the typical salary, at \u00a31,369 a month, Hamptons said.<\/p>\n With such high housing costs it is no wonder that 18 per cent of Gen Z have no savings, according to research by Aldermore Bank. Some 27 per cent of young people said they had no spare cash left after paying for essentials.<\/p>\n \u2022 \u2018First-time buyers want cheaper homes \u2014 not bigger mortgages\u2019<\/b><\/a><\/p>\n The pension problem<\/p>\n Gen Z will be the first to feel the full benefit of auto-enrolment, where anyone aged 22 and over and earning at least \u00a310,000 is automatically signed up to their workplace pension scheme. As a minimum, they contribute 5 per cent of their salary and their employer pays in 3 per cent.<\/p>\n It has been a resounding success, with more people saving for retirement than ever before. But most are still not putting away enough.<\/p>\n Previous generations have enjoyed far more generous workplace pensions. Coveted defined benefit pensions, which pay a guaranteed income for life, are largely a thing of the past. Those retiring in 2050 are expected to have 8 per cent less private pension income than those retiring today \u2014 equivalent to \u00a3800 a year on average \u2014 according to government figures. It said that 40 per cent of adults were undersaving for retirement, and 45 per cent of working-age adults were saving nothing at all.<\/p>\n Expanding auto-enrolment could help. Number-crunching by the insurer L&G found that under the present system, the average person saving from age 22 to 67 would end up with a pension pot of \u00a3263,852.<\/p>\n Lowering the auto-enrolment age to 18 could boost their pot to \u00a3302,689.<\/p>\n Ditching qualifying bands is another option. At present, the minimum contributions are usually based on earnings between \u00a36,240 and \u00a350,270. Scrapping the lower band, so that contributions are made from the first pound earned, could boost the average retirement pot to \u00a3317,574, L&G said, assuming someone was saving from age 22.<\/p>\n Increasing the minimum contribution levels from 8 per cent to 12 per cent could boost a typical retirement pot to \u00a3454,034.<\/p>\n L&G said that enacting all of these changes (lowering the auto-enrolment age, scrapping the lower qualifying band and boosting minimum contributions) could take the average retirement pot to \u00a3549,717 \u2014 more than double the average under the present system.<\/p>\n The retirement dream<\/p>\n Some 19 per cent of Gen Z would ideally like to retire between the ages of 56 and 60, according to a survey of 5,000 people by the consultancy Barnett Waddingham. But just 18 per cent expect to retire before they are 70 based on their present situation.<\/p>\n James Revell is doing everything he can to save for the future. He pays into a workplace pension through his full-time job as an IT manager at a healthcare company, and then contributes everything he earns from a separate IT support business that he runs, Axys Tech, into a self-invested personal pension (Sipp).<\/p>\n \u201cMy company contributes the statutory minimum and that isn\u2019t going to be enough to live on in retirement so I put in whatever I earn from my own business too,\u201d he said.<\/p>\n Revell, 25, has also been paying the maximum \u00a34,000 each year into a Lifetime Isa since he was 19 and hopes to buy a house next year. On top of this, he has to pay \u00a3350 a month in student loan repayments.<\/p>\n \u201cI pay 8.5 per cent interest on my student loan \u2014 at one point my repayments weren\u2019t even covering the interest. It\u2019s disheartening,\u201d said Revell, who lives in Ampthill, Bedfordshire. <\/p>\n Revell does not believe he will be able to retire in his fifties like his father and his grandparents did \u2014 they both have generous defined benefit pension schemes, which pay an income for life. <\/p>\n \u201cI\u2019m clinging on to the hope that my business will take off and I can start putting more into a pension scheme that way, because if you stick to the minimum contributions it\u2019s not enough to retire,\u201d he said. <\/p>\n Aspirations to retire early seem even more unattainable with the future of the state pension in doubt.<\/p>\n The state pension age is set to rise from 66 to 67 between 2026 and 2028 and to increase again to 68 by 2046. But this could happen sooner now that the government has ordered a review of state pension age<\/a>, meaning that people will either have to work longer or rely more heavily on private pension savings.<\/p>\n There is also speculation over the future of the pension triple lock, which guarantees that the payment rises each year by the highest of inflation, average wage growth or 2.5 per cent.<\/p>\n Scrapping this would mean the payment may no longer keep up with the cost of living, leaving pensioners worse off every year. Some commentators have suggested that the state pension could become means-tested, so that not all pensioners would receive it.<\/p>\n The upshot these changes would be that private pension pots would have to do even more of the heavy lifting in people\u2019s retirement plans.<\/p>\n According to Pensions UK, an industry body, a single person needs an annual income of \u00a331,700 after tax for a moderate lifestyle in retirement, assuming they had no housing costs, which includes \u00a356 a week on groceries, a weekly takeaway and an annual all-inclusive holiday. Combined with the full new state pension, this would require a total pot of about \u00a3490,000<\/a>.<\/p>\n Every six months Hargreaves Lansdown and the think tank Oxford Economics analyse 16 separate measures of wealth for their savings and resilience barometer. Its latest data showed that just 28 per cent of those aged 20 to 24, and 31 per cent aged between 25 and 39 were on track to have saved enough for a moderate lifestyle. That compares with 42 per cent of those aged between 45 and 49. <\/p>\n The pension firm Scottish Widows estimated that 39 per cent of people in the UK were not on course for even a minimum standard of living in retirement.<\/p>\n Carina Chambers from the investing app Moneyfarm said: \u201cYoung people need to plan with far more precision and be prepared to contribute far more heavily than any previous generation, because it is going to fall much more on the individual to financially support themselves than ever before.\u201d<\/p>\n
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