IFoA calls for measures to improve Gen Z retirement prospects
Image: cottonbro studio/Pexels
Pardon the Interruption
This article is just an example of the content available to mallowstreet members.
On average over 150 pieces of new content are published from across the industry per month on mallowstreet. Members get access to the latest developments, industry views and a range of in-depth research.
All the content on mallowstreet is accredited for CPD by the PMI and is available to trustees for free.
The Institute and Faculty of Actuaries is calling on government to address housing affordability, student debt and access to pensions for gig workers and the self-employed, as a new report by the Pensions Policy Institute highlights a bleak retirement outlook for Gen Z.
The report, ‘The concerns of Gen Z’, produced by the Pensions Policy Institute, says the generation born between 1997 and 2012 faces high barriers to building up retirement savings, which range from high housing costs and student debt to insecure work limiting their ability to save into a pension, all while carrying their own longevity and investment risks in a defined contribution system.
The rising cost of housing and the burden of student loan repayments in particular are leading many to focus on shorter term financial pressures, according to the IFoA, which warns the financial situation of Gen Z will have “profound long-term implications” for economic stability, social equity and the sustainability of pension systems. The IFoA also expresses concern about the delay to the adequacy phase of the government’s Pensions Review.
The report suggests:
The rising cost of housing and the burden of student loan repayments in particular are leading many to focus on shorter term financial pressures, according to the IFoA, which warns the financial situation of Gen Z will have “profound long-term implications” for economic stability, social equity and the sustainability of pension systems. The IFoA also expresses concern about the delay to the adequacy phase of the government’s Pensions Review.
The report suggests:
- policies that address housing affordability and student debt; and
- creating pension schemes that support the increase in people working in gig-based roles and self-employment.
PPI policy researcher Shantel Okello said Gen Z is navigating a “vastly different” financial landscape from previous generations and warned urgent action is needed.
“Expanding access for gig workers and the self-employed, reassessing contribution adequacy, and modernising communication strategies could help build a system that better reflects modern working lives,” Okello said.
“Expanding access for gig workers and the self-employed, reassessing contribution adequacy, and modernising communication strategies could help build a system that better reflects modern working lives,” Okello said.
“Without meaningful reform, there is a risk that a growing proportion of young people will reach retirement without the savings necessary to maintain an adequate standard of living,” she added.
Many members of Gen Z are not optimistic about their retirement prospects. The report found that 46% believe the state pension will not exist by the time they reach retirement, and 47% say they plan to move to part-time work rather than stop working entirely once they reach retirement age. This compares with 76% of current retirees having stopped working completely at retirement.
Alexandra Miles, from the IFoA Pensions Gap Working Party, said Gen Z is likely to face longer working lives and a longer period of retirement.
“The current rigid life-stage model will need to shift to a far more fluid, adaptable approach where retirement is redefined as an evolving phase rather than a fixed endpoint,” Miles said, calling on industry, regulators and policymakers to play their part in addressing this shift.
IFoA president Kartina Tahir Thomson said: “We need to think about how we can better support individuals, including those in Gen Z, to make financial choices that will support them later in life. This will require a coordinated approach with industry, governments and policymakers working together to come up with tangible solutions that tackle issues now in order to safeguard the future.”
Many members of Gen Z are not optimistic about their retirement prospects. The report found that 46% believe the state pension will not exist by the time they reach retirement, and 47% say they plan to move to part-time work rather than stop working entirely once they reach retirement age. This compares with 76% of current retirees having stopped working completely at retirement.
Alexandra Miles, from the IFoA Pensions Gap Working Party, said Gen Z is likely to face longer working lives and a longer period of retirement.
“The current rigid life-stage model will need to shift to a far more fluid, adaptable approach where retirement is redefined as an evolving phase rather than a fixed endpoint,” Miles said, calling on industry, regulators and policymakers to play their part in addressing this shift.
IFoA president Kartina Tahir Thomson said: “We need to think about how we can better support individuals, including those in Gen Z, to make financial choices that will support them later in life. This will require a coordinated approach with industry, governments and policymakers working together to come up with tangible solutions that tackle issues now in order to safeguard the future.”
How can industry help improve the retirement prospects of Gen Z?
