Tuesday 30 September 2025 6:00 am
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Monday 29 September 2025 5:14 pm
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Rathbones said it was “shocking” that Gen Z needed to stockpile so much money to retire comfortably (AI-generated image)
People in their 20s will need at least £3m pension pot if they want to enjoy a comfortable retirement, a fresh study has shown, throwing into sharp relief the corrosive impact that inflation has on savings.
According to an analysis from Rathbones, a 25-year-old today will need a pension pot of £3.1m if they want to live comfortably for quarter of a century after retiring at 65.
The number, which the wealth manager arrived at using the Pensions and Lifetime Savings Association’s definition of a ‘comfortable retirement’ and assuming two per cent annual inflation, is more than double the current estimate of £1.4m you need for a decent life when you retire.
In order to build up a £3.1m nest egg, a 25-year-old would need to save roughly £1,600 per month – just shy of £20,000 per year – assuming their contributions increase by two per cent annually and their pension pot grows at an average of five per cent a year.
For a two-person household in which both Gen Z individuals are aged 25, the figure needed for a comfortable retirement rises to £4.3m, Rathbones said.
“The [£3.1m] figure is shocking and serves as a start reminder of how inflation can quietly erode retirement savings,” said Rebecca Williams, financial planning lead at Rathbones.
“While a comfortable retirement means different things to different people, young 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.”
Bank of Mum and Dad already helping Gen Z pensions
The analysis also found that a ‘moderate’ lifestyle would require £2.2m for a single person, and £3.1m for a two-person household. Gen Z savers would need £947,700 to live a ‘minimum’ lifestyle.
Williams added that wealth managers were increasingly seeing the ‘Bank of Mum and Dad‘ step in to top up their Gen Z children’s pension pots with gifts or by setting up junior SIPPs.
“Starting early and saving consistently is key; even modest, regular contributions can grow substantially over time,” she said. “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.”
It is also likely that the study has underestimated the size of the nest egg needed for a comfortable livelihood in retirement. Many analysts believe the speed of price rises will remain above the Bank of England’s official two per cent target for several years as the country battles to free itself from a sustained period of ‘stagflation’, where slow economic growth clashes with high inflation.
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High living costs threaten Gen Z and Millennials’ pensions
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