A stark financial reality is compelling a generation to redefine retirement planning: around half of Gen Z, those born between 1997 and 2012, do not believe the state pension will exist by the time they reach old age. This profound skepticism is driving many younger individuals, like early-20s engineer Joel, to channel significant portions of their income into private workplace pensions, even while living at home and navigating the rising cost of living.
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The Generational Doubt Over State Support
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Joel, who recently secured his first graduate engineering role in London, exemplifies this trend. Instead of allocating his new income to immediate luxuries or a house deposit, he is “squirrel[ing] more of it away into his workplace pension” because he doesn’t expect to receive a state pension. “I don’t believe that I’ll be a recipient of a state pension. I know a lot of people my age don’t think they’re going to be… There just won’t be enough money,” he states, reflecting a widespread sentiment among his peers.
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This doubt stems from a constant stream of headlines concerning an ageing population, a proportionally shrinking working-age population, and the mounting pressure on government finances. Joel articulates a common concern, noting, “It just mathematically doesn’t make sense… There has to get to a point where that state pension is taking up too much of the budget and can’t exist in the way that it exists right now.”
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Shifting Goalposts and Demographic Pressures
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The state pension age is already in flux. It began a gradual increase from 66 to 67 years in April, set to conclude by March 2028, with a further rise to 68 projected in 20 years, potentially sooner. This constant adjustment is a source of frustration for individuals like 27-year-old retail manager Connor, who observes that “the goalpost keeps moving.” He anticipates retiring “probably closer to 75, if I’m honest,” rather than the current projected age of 68.
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The demographic challenge is clear: over 13 million people, or 19% of the population, are currently of state pension age. Projections indicate this group will exceed 15 million by 2050, representing nearly a quarter of the population, and could climb towards 17 million by the 2070s. This means a growing number of beneficiaries will rely on a proportionally smaller working population paying taxes into the system.
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Compounding this issue, almost half of working-age adults are not contributing to a private pension pot, leaving them potentially reliant solely on the state pension. With relative poverty rates among pensioners currently at 14%, the difficulties of such reliance are already evident.
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The Triple Lock Under Scrutiny
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For those currently reaching state pension age, a key protection is the triple lock, which guarantees annual increases matching inflation, average earnings, or 2.5% – whichever is highest. This ensures a weekly entitlement of £241.30 for those with 35 years of National Insurance contributions.
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However, this mechanism is facing calls for reform. The centre-left Resolution Foundation think tank has argued for scrapping the triple lock, deeming it unfair to prioritize pensioner incomes over those of working-age adults and children. The Tony Blair Institute (TBI) goes further, advocating for the complete abolition of the state pension in favour of a new “Lifespan Fund.” Thomas Smith, director of economic policy at the TBI, states, “Britain’s state pension system was built for a different era. We can’t keep pouring money into a system that is increasingly unaffordable.” The TBI’s proposal includes allowing early access to state pension funds in cases of redundancy, an idea that might appeal to Connor, who is currently facing redundancy.
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Conversely, former pensions minister Steve Webb warns that such changes would be “a huge backward step,” arguing for the simplicity of the current system. While the government has committed to the triple lock for the remainder of this parliament, an independent Pensions Commission is reviewing how to ensure secure retirements for future generations. It is widely anticipated that Gen Z will not benefit from a triple-locked pension, making sole reliance on the state pension increasingly challenging.
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Radical Ideas and Savings Imperatives
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The debate often extends to more radical solutions, such as means-testing the state pension. While Pension Credit already exists for very low-income pensioners, Joel believes more extensive means-testing might be necessary for the state pension’s survival. “I don’t think a means-tested state pension is necessarily a bad thing. But it would be a bad thing if it only applies to people in 50 years and not now when we should be saving some of that money,” he argues.
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The financial burden on Gen Z is significant. Investment company Rathbones estimates that a single person retiring today at 65 with the state pension needs approximately £796,000 in savings for a “comfortable retirement.” For a 25-year-old today, this figure rises to £1.68 million with the state pension, but without it, the required savings jump to more than £2.4 million.
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Alternative Paths and Widening Gaps
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Faced with these figures and a lack of trust in traditional systems, some of Joel’s friends are considering opting out of private and workplace pensions altogether, preferring independent investments in “crypto or index funds and things like that.” Joel notes, “There’s a sense, whether it’s right or wrong, that that’s more secure than putting it in a pension where they’re also going to take a chip on top.” While individual investment choices can potentially yield higher returns, they also carry significant risks.
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Behavioural economics suggests that a loss of trust can lead to either complete disengagement or over-compensation, both of which can be problematic. Ashleigh, 23, on a lower income, opted out of her employer’s auto-enrolment pension, stating, “I need the money now.” She prioritizes saving for a house, believing “at least I have something to show for it.” This choice, while understandable for immediate needs, highlights the difficult trade-offs younger generations face.
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Experts, including Dr. Suzy Morrissey, deputy director at the Pensions Policy, warn that these trends could significantly widen the gap between rich and poor in retirement for this generation, creating a bifurcated future where financial security is increasingly dependent on individual foresight and capacity for substantial private savings.
