For years, the pensions industry has wondered how to improve engagement with younger savers. There is a perception that they don’t care, or are too short sighted, about understanding the long-term benefits of saving into a pension scheme.

The Pensions Policy Institute (PPI) noted that it believed young people had a “live for today attitude”; that there was a “perceived” lack of affordability and a lack of knowledge amongst the younger generations. This could all be true. It does seem as if young people are apathetic towards saving for the future, and the pension industry has tried a multitude of actions to remedy this attitude.

Technology is being embraced more than ever, with the announcement of the pensions dashboard and number of institutions launching initiatives in an attempt to move with the times proving this to be the case. However, its adoption has been too slow; the industry and government only needs to look at the success of online banking to see where it could have progressed to.

Auto-enrolment has been credited with helping young people save for their future, but auto-enrolment isn’t improving genuine engagement. Forcing young people into saving for pensions does not educate or increase their interest in saving for their retirement. It is wishful thinking to believe that auto-enrolment has been successful in improving young member engagement; rather it has just improved the numbers saving.

For all the reasons given for why young people are uninterested in pensions, there is one factor that is the most important, influential and critical to the lack of engagement amongst the younger generation, and that is living costs.

Why would someone aged 20-30 spend time considering what their financial security will be like in 40-50 years time if their current financial situation means that they can’t even afford to rent, let alone buy a house, while having income spare for other essentials?

Do we really believe that young people have the money to put into a pension scheme when the gap between the cost of living and wages is so slim, house prices are so high, and rail travel costs are through the roof?

According to the Nationwide Building Society, the average house price in the UK in 2018 was around £217,000, while the Annual Survey of Hours and Earnings found that the average annual wage of an employed 22-29 year old was £24,850.

BDI Resourcing estimated that the average cost of living and renting in the UK was around £1,300 per month, or £15,600 per year, and this does not account for any additional, emergency costs or luxuries. Therefore, the average young person has around £11,000 per year in disposable income, or less than £1,000 per month.

If that young person is looking to purchase a property, they would have to save every penny of their disposable income for nearly two years, with no luxuries and no emergency fees, before they would even have enough to put down a 10 per cent deposit on an average property.

Furthermore, it’s not just houses that young people may be saving for. They may need a car, an engagement ring, or want to go travelling. With this in mind, is it any wonder that young people are not engaging enough with their pension? Their problems are in the here and now, and are too deep rooted for the pensions industry to remedy by itself. Until things improve economically for the younger generation, the apathy towards retirement saving will continue.

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