Why Gen Z is planning for life without a state pension

In central Manchester, Ashley, 23, agrees with Joel that the state pension is unlikely to come her way: “I don’t think anyone is going to retire at this rate, I think everyone has to be self-sufficient in the end.”

But as a low-income earner, her retirement options don’t look a bit squishy. She says she chose to stop contributing to her employer’s car registration pension while working at a large retailer.

“I opted out of it. I need the money now.” “I’d rather save for a house and at least have something to show for it,” she explained.

Some experts warn that the gap between rich and poor in retirement may widen significantly for this generation.

Dr. Susie Morrissey, deputy director at the Pension Policy Institute (PPI), believes another factor widening the divide is how much Gen Z saves privately: Many of them rent.

“Renting in retirement increases the risk of poverty for retirees and, as young people, they face challenges to survive that previous generations did not face when they were at the same age,” she said. “If we have people paying rent in retirement and don’t have a big pension pot to cover those costs, that’s a high risk of pensioner poverty.”

But Morrissey sees a silver lining: pension auto-enrolment, a system that puts most workers directly into workplace pensions unless they opt out. If they are employed, they will “spend their working lives contributing to the pension pot and be the first generation to spend their whole lives doing that”.

It will be a backstop for many, but the minimum contribution rate may not be enough for a comfortable retirement. It’s not automatic for self-employed people, and people like Ashley have opted out immediately due to financial pressures, so the abundance of that silver lining seems invisible.