More than two-fifths (42 per cent) of Gen Z are on track for retirement poverty if they remain at the minimum automatic enrolment (AE) contribution levels of 8 per cent of qualifying earnings, according to research from Penfold.

The pension provider said younger workers continued to face competing financial demands, with retirement saving often falling behind more immediate priorities such as housing costs and day-to-day finances.

It’s research found that although many Gen Z savers would like to retire earlier and achieve greater financial freedom, retirement can feel too distant to compete with short-term financial goals.

Penfold pointed to evidence that younger investors are favouring more accessible savings vehicles, such as cash savings and ISAs, over pensions, highlighting their flexibility and accessibility.

The firm argued that the pensions industry needs to make retirement saving more relevant and understandable for younger workers.

"Pension planning still asks Gen Z to prioritise a future that is decades away, while many young people are focused on paying rent, saving for a home and managing the rising cost of living,” said Penfold co-founder Chris Eastwood.

"Many younger people already know financial security is important and aspire to achieve greater financial freedom, including earlier retirement than previous generations. Yet pensions are often presented as a sacrifice today for security tomorrow, rather than a tool for building long-term financial confidence.”

He continued: "If we want younger generations to take a more active role with pensions, we need to make them simpler to understand and more clearly connected to the financial goals people are already working towards. Technology that gives people a clearer picture of what they have already saved has a strong role to play."

Eastwood said pensions dashboards could help make retirement planning more tangible by allowing savers to view all their pension savings in one place.

He added that rather than focus exclusively on retirement, the conversation should be broadened to include financial freedom and confidence.

“People are more likely to take action when they can clearly see the value of what they are building,” concluded Eastwood.

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