The under 40s need to contribute more into a pension, if they are to maintain current spending habits in retirement.
According to current research the average millennial is spending around £1,700 a month, more than twice as much as the State Pension.
Profile Pensions analysed the spending patters of different generation groups – including both essential and more discretionary spending. It says it highlighted this potential pension gap to encourage younger workers to save more into pension, and make the most of workplace pensions available.
Even making minimum contributions under automatic enrolment may not be sufficient to build adequate retirement income and Profile Pensions urges workers to make the most of any ‘matching’ arrangement available.
Key figures in their research show that millennials (those born between 1981 and 1996) pay an average of £773 in rent alone each month, more than the average state pension of £731.
Discretionary spending pushed these totals upwards, with the average millennial spending £52 a month just on takeaway coffees and £40 a month on gym membership.
Profile Pensions also pointed out essential spending on housing bills and food was almost £600 a month more than the state pension.
It adds that people may think that their lifestyle will change after retirement, but these figures show that they need to be saving more to ensure not only the basics are covered but to enjoy a better standard of living.
Profile Pensions chief investment officer Michelle Gribbin says: “Although monthly expenses can vary from generation to generation, we wanted to showcase to those still climbing the career ladder the necessity of preparing for their financial future early, by highlighting just how much of their current lifestyles they would have to change in order to live comfortably in retirement.
“Although it can be easy to glance over small indulgences from time to time, it does all add up, and preparing for retirement is key for us all, no matter our age. In fact, as our results show, the earlier you can start saving, the more comfortable your retirement can be. ”