Gen Z may need over £3m for a comfortable retirement, Rathbones warns

Gen Z may have to build a £3m+ pension pot to secure a comfortable retirement, according to analysis from Rathbones Group.

The figure factors in 65 years of 2% annual inflation, showing how the value of money will erode before today’s 25-year-olds reach retirement.

Based on Pensions and Lifetime Savings Association (PLSA) standards for a “comfortable” lifestyle, Rathbones calculated that a single 25-year-old would need £3.1m by age 65 to fund 25 years of retirement.

In today’s money, that equates to about £1.4m, while a two-person household would require £4.3m (£1.9m in today’s terms).

Rebecca Williams, divisional lead of financial planning at Rathbones, said: “The figure is shocking and serves as a stark reminder of how inflation can quietly erode retirement savings.

“What’s considered an adequate retirement nest egg today may barely scratch the surface of what Gen Z will need when they retire.

“Younger generations face higher hurdles – from high housing costs to student debt – while also needing to ensure their savings stretch further to account for greater longevity.”

Rathbones’ modelling shows that to reach £3.1m by 65, a 25-year-old would need to save around £1,600 a month if investing in a pension growing 5% annually with contributions rising 2% a year.

Someone relying on cash savings at 2% interest would need to save nearly £3,000 a month, highlighting the value of tax relief and employer contributions in workplace pensions.

Williams added: “Starting early and saving consistently is key; even modest, regular contributions can grow substantially over time.

“With a longer investment horizon, younger savers can typically afford to take on more risk, potentially boosting returns.

“Regular pension top-ups benefit from compound growth and tax relief, while maximising workplace pension contributions – especially employer matches – is essentially free money.”