Young Adults Planning Without a State Pension Still Need to Consider Protection

Gen Z Is Planning for an Uncertain Retirement — But What About the Financial Risks Before Then?

A BBC report examining Generation Z's expectations of retirement has highlighted how differently many younger adults are thinking about their financial future.

Around half of Gen Z respondents cited in the report said they did not expect the State Pension to exist by the time they retire. For some, that uncertainty is encouraging greater reliance on workplace pensions, private savings and investments much earlier in life.

Whether those fears ultimately prove justified is impossible to know decades in advance. The State Pension remains part of the UK retirement system today, while its future cost, eligibility age and structure will continue to be matters for successive governments and future reviews.

But the story raises a wider financial-planning question that is particularly relevant to younger adults. Saving for retirement is important, but retirement may be 40 years away. Financial plans also need to survive everything that can happen between now and then.

For somebody in their twenties or early thirties, future earnings may be their biggest financial asset. Death, serious illness or an extended inability to work can disrupt that asset long before pension savings become available.

Retirement planning and protection planning solve different problems

Pensions are principally about creating an income for later life. Protection is about managing financial risks that can arise before that point.

The distinction matters because somebody can be doing everything apparently right for retirement — contributing to a workplace pension, building investments and avoiding unnecessary debt — while still being financially vulnerable if their income suddenly disappears.

For a young adult living alone, renting and with nobody financially dependent on them, life insurance may genuinely have little immediate purpose. Our guide Do I Really Need Life Insurance? starts with exactly that principle: life insurance is most relevant when somebody else would be financially worse off if you died.

That means being young is not, by itself, a reason to buy life insurance. The important question is whether a financial dependency exists.

Life insurance needs can change surprisingly quickly

The difficulty is that financial circumstances can change much faster than retirement plans.

Someone may move from renting with friends to buying a home with a partner. A couple may have a child. One person's income may become important to meeting a joint mortgage. Somebody may start supporting an elderly parent or take on commitments through a business.

At that point, death can create a very different financial consequence.

A person who genuinely had little need for life insurance at 24 could have a substantial need at 29. The decision is therefore better reviewed around major life changes rather than based simply on age.

For homeowners, our guide to how life insurance works with a mortgage explains why taking on joint housing debt is often one of the points at which protection becomes more relevant. A mortgage does not disappear simply because one borrower dies, and the surviving household may need to maintain repayments using a reduced income.

For younger adults, inability to work may be the more immediate risk

Life insurance tends to dominate protection discussions because death is easy to understand as a financial event. For many younger adults, however, the more immediate risk may be surviving but being unable to earn.

Someone in their twenties may have decades of future salary ahead of them but relatively little accumulated wealth. If illness or injury prevents them from working for an extended period, that future earning capacity can suddenly become difficult to access.

Emergency savings can provide an important first line of defence. Employer sick pay may also provide meaningful support, particularly during shorter absences. But those arrangements have limits, and workplace benefits vary significantly between employers.

This is where income protection can become relevant. It addresses a different problem from life insurance by providing an income following an eligible inability to work, subject to the policy's definition of incapacity, waiting period, benefit level and maximum claim duration.

The point is not that every young worker should buy income protection. It is that somebody planning carefully for retirement should also understand what would happen to their finances if they could not work for six months, a year or considerably longer.

Critical illness cover addresses another gap

Critical illness insurance is different again.

Instead of paying primarily following death, it can provide a lump sum following diagnosis of one of the serious conditions covered by the policy, provided the claim meets the insurer's definition.

That money might be used to reduce debt, adapt working arrangements or provide financial breathing space during treatment and recovery.

Our guide to life insurance versus critical illness cover explains why the two products should not be treated as interchangeable.

Somebody with no financial dependants may decide that life insurance has little current value while still considering the financial consequences of becoming seriously ill themselves. Protection planning should therefore begin with the event somebody is trying to protect against rather than with the name of a product.

Buying life insurance young is not automatically a good decision

Life insurance usually becomes more expensive as an applicant gets older because age is one of the factors insurers use when assessing risk.

Our guide to why life insurance generally costs more as you get older explains how age, health, smoking status, occupation and policy term can influence the eventual premium.

That can create a tempting argument: buy as much cover as possible while young because it is cheaper.

But cheaper does not automatically mean necessary.

A 22-year-old with no mortgage, partner, children or other financial dependants could potentially spend years paying for cover against a financial problem that does not yet exist.

A better principle is to arrange protection when a genuine need appears, rather than buying insurance solely because the applicant happens to be young.

Waiting indefinitely has risks too

The opposite extreme can also create problems.

Someone who knows that another person already depends on their income may postpone life insurance on the assumption that it will be easy to arrange later.

Age can increase the cost of new cover, but health changes can sometimes matter even more.

A diagnosis, treatment or ongoing medical investigation can alter the way a future insurer assesses an application. Depending on the circumstances, the outcome could be a higher premium, further medical evidence, postponement or difficulty obtaining the required cover.

Our guide to life insurance with a pre-existing medical condition explains why having a medical history does not automatically prevent somebody obtaining insurance, but can affect underwriting.

The balance is therefore fairly simple: do not buy protection before there is anything meaningful to protect, but once a genuine dependency exists, there can be disadvantages to postponing the decision indefinitely.

A very long policy term is not necessarily better

Young applicants can also be offered extremely long policy terms.

A long term may be appropriate where the dependency itself will last for decades, perhaps because somebody has just started a 35-year mortgage or has young children.

But duration should still have a purpose.

Our guide to how long life insurance should last explains why the term should broadly match the period during which somebody would suffer financially following the insured person's death.

Choosing a 40-year policy simply because somebody is young can mean paying for cover long after the original financial need has disappeared. Equally, choosing too short a term can leave a protection gap while a mortgage or family dependency still exists.

The objective is not to maximise the policy length. It is to match it to the risk.

Workplace benefits are useful, but they can change

Younger workers should also understand what protection is already provided through employment.

Some employers offer death-in-service cover, which may provide a multiple of salary if an employee dies while qualifying for the scheme. Others provide enhanced sick pay or access to group income protection and other benefits.

These arrangements can form an important part of someone's financial safety net and should be considered before buying additional personal cover.

However, workplace benefits are normally linked to the employment providing them. Someone changing jobs, moving into self-employment, being made redundant or taking a career break may lose some or all of that protection.

That is particularly relevant to younger generations whose careers may involve several employers, periods of retraining or breaks from conventional employment.

A benefit provided by today's employer should therefore not automatically be treated as lifelong personal protection.

Not every debt creates a life insurance need

Debt also needs to be considered carefully.

A common mistake is to add together every outstanding balance and assume life insurance is needed to clear all of it after death.

The legal position depends on the type of debt, whether it is held jointly, whether another person is liable and what assets exist within the estate.

A joint mortgage is very different from borrowing that belongs solely to the deceased. Likewise, somebody renting alone may have very little housing-related financial dependency compared with somebody who has purchased a home with a partner.

Life insurance planning should therefore focus on what another person would actually become responsible for rather than simply treating all borrowing as inheritable.

Future earnings can be more important than current wealth

One of the interesting features of financial planning for younger adults is that they may appear to own relatively little while still having substantial long-term economic value.

A 27-year-old may have modest savings and only a small pension pot today, but potentially has another 40 years of earnings ahead.

As relationships, mortgages and children appear, more of that future income can become committed to other people.

That is when protection starts to become important.

Our guide to how much life insurance you may need looks beyond the current bank balance and considers mortgages, future household income, childcare, debts, savings and existing benefits together.

For younger families in particular, the financial value being protected is often not what somebody owns today. It is what they would otherwise have contributed over the years ahead.

Retirement uncertainty should not encourage panic planning

The BBC's report reflects a genuine concern among younger adults about what retirement will eventually look like.

But financial planning over 40 or 50 years inevitably contains uncertainty. Governments change, tax systems change, pension rules change, careers change and individual circumstances change.

Trying to predict every rule that will exist in the 2060s is unlikely to produce a perfect financial plan.

A more practical approach is to build financial resilience in stages.

In the early years of work, that may mean building an emergency fund, understanding workplace pension contributions and avoiding expensive unsecured debt. As income rises and financial commitments develop, protection can be added where genuine dependencies appear.

A joint mortgage might create a life-insurance need. Children might increase the amount required. A growing emergency fund might reduce reliance on some types of short-term protection. Later in life, falling debts and increasing savings can reduce the amount of insurance needed again.

Protection planning should change as life changes.

There is no contradiction between saving and protecting

Pensions, investments, savings and insurance are sometimes discussed as though money allocated to one cannot serve the wider financial plan.

In reality, they perform different jobs.

Savings provide accessible money and flexibility. Pensions are designed primarily to fund retirement. Life insurance can protect other people financially following death. Critical illness cover can provide money after a qualifying diagnosis, while income protection can help replace earnings during an eligible period of incapacity.

The appropriate balance will vary significantly between individuals.

Someone without dependants may rationally prioritise emergency savings and pension contributions over life insurance. Five years later, after buying a home and starting a family, the balance may need to change.

That is not inconsistent financial planning.

It is financial planning responding to reality.

The State Pension question is only one part of a much longer journey

Generation Z may ultimately experience a retirement system that looks different from today's.

The current State Pension remains in place, while the legislated eligibility age is already moving higher and remains subject to periodic review.

But for somebody currently in their twenties, retirement represents only the final stage of a financial journey spanning several decades.

There will be houses, jobs, relationships, illnesses, career changes, children and unexpected events before then.

Planning only for the destination can leave the journey itself exposed.

The bottom line

Younger adults do not automatically need life insurance simply because premiums can be lower at younger ages.

If nobody depends financially on you, there may be little immediate need for cover.

But that position can change quickly.

A joint mortgage, partner, child, dependent relative or business commitment can turn future earnings into something another person relies upon. At that point, life insurance may become relevant.

At the same time, death is only one financial risk. Younger workers whose greatest asset is decades of future income should also understand their emergency savings, employer sick pay and what would happen if illness prevented them working.

The useful lesson from Gen Z's uncertainty about retirement is therefore broader than pensions.

Plan in stages.

Build accessible savings. Understand workplace pensions and benefits. Know what debts and commitments you actually have. Add protection when another person genuinely depends on you, and review it when those circumstances change.

For anyone unsure where they currently stand, start with Do I Really Need Life Insurance?, then look at how much life insurance you may need and how long that cover should last.

You can also visit Life Insurance Explained for wider guidance on mortgages, families, medical underwriting, critical illness and different types of protection.

Sources

BBC Business — Why Gen Z are planning for life without a state pension, 30 June 2026.

GOV.UK — State Pension age timetable.

Government Actuary's Department — GAD and the State Pension age review, 25 July 2025.

This article is for general information only and does not constitute pension, investment, financial or insurance advice. State Pension rules, workplace benefits, protection needs, underwriting and policy terms can change and depend on individual circumstances.