Young people in their 20s are likely to need at least £3m to retire comfortably due to the "erosive" impact of inflation, research from Rathbones has revealed, prompting calls for this cohort to start saving early and consistently.

The analysis, based on the amount needed for a ‘comfortable’ retirement as defined by Pensions UK, found that a 25-year-old would need £3.1m in pension savings to retire at age 65 and live comfortably for 25 years.

This figure includes 2 per cent yearly inflation for the next 65 years (40 years until retirement at age 65, followed by 25 years in retirement to age 90), showing how inflation reduces the value of money over time.

In today’s terms, this is equal to over £1.4m - the amount needed by someone retiring now at age 65 - for a comfortable retirement over 25 years.

In addition to this, a young couple who are both 25 years old would need £4.3m in the future to retire comfortably, which is about £1.9m in today’s money.

Given this, Rathbones divisional lead of financial planning, Rebecca Williams, said that these figures are “shocking” and serve 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,” Williams said.

This is not the only concern, as Rathbones also emphasised that the current economic landscape, high housing costs, student debt, and broader cost-of-living pressures have “amplified” the challenge of saving for retirement for younger generations.

“While a comfortable retirement means different things to different people, younger generations face higher hurdles, while also needing to ensure their savings stretch further to account for greater longevity," Williams stated

Williams also pointed out that with final salary schemes “fading into history”, the responsibility for retirement savings increasingly falls on individuals.

She suggested that although auto-enrolment has “helped lay the groundwork”, minimum contributions often fall short, particularly for those in irregular or gig economy roles, where pension gaps are common and frequent job changes can also leave savers with scattered, forgotten pots.

Given these challenges, she argued that “starting early and saving consistently is key” as even modest, regular contributions can grow substantially over time.

Williams also suggested that due to a longer investment horizon, younger savers can typically afford to take on more risk, which could potentially boost returns.

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

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