Can future generations rely on government support in retirement?

Together, with the *International Longevity Centre, M&G commission a report looking at people’s perceptions about how the government supports different generations financially, especially when it comes to retirement.

Across generations, most people surveyed, believe that government support for older generations is likely to decrease in the future. More than half of respondents aged 25 and over believe government support for older generations will decrease in the future and that today’s younger generations cannot expect to receive the same level of government support as current retirees when they reach retirement age.

This puts more pressure on today’s younger generations to save enough to provide a decent standard of living in retirement.

So is this making people more aware of the importance of saving for older age?

The research asked what the respondents  would do when faced with a £10,000 windfall.  Most people said they would put at least some of this money towards savings. This appetite for saving was particularly strong among young adults: nearly 3 in 4 people aged 18 to 24 said they would put some of this money into savings.

And more than 1 in 4 people in this age group said they would use some of the money  for investments, such as buying stocks and shares. However, fewer than 1 in 10 people under 50 said they would put some of the money away for retirement, compared with almost a third of people aged 50-64. So in this context it’s likely people are saving for short  to medium term events like buying a house.

There is a significant appetite for saving across all age groups. However, particularly among younger age groups, there is little appetite for retirement saving with other things taking priorities. If people leave things too late they could be looking at a retirement that is far from their expectations.

What does this mean?

If people aren’t encouraged to start saving for retirement at a younger age it could mean future generations of retirees will be worse off than current generations, with less savings of their own and dwindling support from the government.

It’s also a common misconception that everyone will be entitled to a State Pension, but this isn’t always the case. The State Pension is built-up from National Insurance contributions – and in simple terms, you need to have paid enough into the ‘pot’ (or been exempt for specific reasons) to qualify.

Currently, the level of State Pension you’ll be entitled to will depend on your National Insurance record and you can find a forecast of your State Pension online but who is to say what this will look like for future generations.

It’s also widely argued the State Pension isn’t enough to live on now let alone if government support decreases in the future.

This just highlights the importance of looking at a long term financial plan as early as possible and how important it is having other forms of income you can draw upon in retirement.

* ILC UK - Intergenerational inequality and the future of the social contract, June 2024. Supported by M&G