30 July 2019 A third of millennials are counting on an inheritance windfall to fund their own retirement, according the new research from specialist lender Hodge.
Nearly half of those surveyed said they felt unprepared for retirement, citing higher cost of living (67%) and lack of job security (42%), with a quarter saying they were or had been prioritizing getting on the housing market over considering life after work.
As a result, just 15% of those questioned had savings over £10,000 or were contributing to a pension at a higher rate than their auto-enrolment level.
As such, nearly 65% of those aged between 25-45 felt their existing savings and pension pots would not be enough for them to able to enjoy retirement, with a fifth claiming they would not be able to afford to retire at all, without receiving an inheritance windfall.
The research found seven out of 10 were expecting to receive some level of inheritance, with an average expectation of £86,000.
The figures are concerning, as without private income, millennials could face a significant retirement gap when they reach retirement age.
According to ONS figures, the average weekly expenditure for a retired person is £249.40. As of June 2019, the full state pension is £168.60. This means for each year in retirement someone without an additional source of income would face a £4,201.60 shortfall each year. For someone looking hoping to retire at 66, this would mean a £58,822.40 deficit.
How millennials expect to fund retirement (choose all that apply)
- Don’t know (35%)
- Private / Employer pension (34%)
- Receiving an inheritance from parent/grandparents (33%)
- State Pension only (25%)
- Own savings (18%)
- Investments (such as shares, gold or cryptocurrencies) (13%)
- Winning the lottery (3%)
Matt Burton, managing director for mortgages at Hodge said; “With housing and living costs rising, it’s not surprising to see people hoping for a cash windfall to come their way in later life.
“However, relying on an inheritance can be an extremely risky strategy to fund retirement, and also creates a knock-on effect for future generations.
“While the idea of saving more is easier said than done, it’s really important for people to try and consider their retirement as soon as possible. Aside from putting money away in a savings account, another solid strategy is to look to increase your pension contributions to more than the minimum as soon as possible, ideally before you can notice the money coming out of your paycheck.
“For those later in life concerned about retirement, there are a range of options such as 55+ mortgages, RIO mortgages and equity release products designed to help you unlock the value in your existing assets to fund your retirement.”