Young people and retirement: saving for the future

Abstract

In the UK, new Government pension reforms aimed at preventing a future of poorer pensioners represent a continuing policy emphasis on individual responsibility. Two main elements of the reforms are the introduction of Personal Accounts and a gradual increase in the age of eligibility for state pensions, from 65 to 68. These reforms will affect young people in particular. The success of the reforms in preventing a future of poorer pensioners will require young people to save more in Personal Accounts or alternative retirement saving vehicles. Young people wishing to retire before the state pension age will need to save even greater amounts. Despite the implications of these reforms for young people, retirement saving amongst young people is an under-researched topic. This research aims to help fill the gap. The research examines retirement saving behaviour and attitudes amongst young people under the age of 35, using secondary data analysis of the 2005/6 Family Resources Survey and semi-structured interviews. The findings are analysed within a framework of structure versus agency. The results suggest that although the majority of young people have positive attitudes towards retirement saving, actual pension saving activity depends more on labour market position than on saving intentions. In terms of access to pensions, young people are structurally disadvantaged when compared with other age groups, yet the blame for failure to save falls firmly upon the individual. The policy implications are that Personal Accounts will increase the level of retirement saving amongst young people, but considerable numbers of young people with limited access to the new scheme will remain disadvantaged. Furthermore, very few young people will be able to reach the level of saving required to retire before the new state pension age. Today’s young people are set to save more and work longer than previous generations.

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ORCID for Maria Evandrou: orcid.org/0000-0002-2115-9358

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