Retirement savings have been growing in focus for Chinese millennials – those aged 18 to 34 – as they achieved the highest retirement savings rates since 2018, however, the concept of retirement investing needs to be further strengthened, according to a recent survey.

The monthly savings rate of young people jumped from 20% in 2020 to 25% this year, with monthly savings reaching an average of 1,624 yuan (US$257), data from the survey published by Fidelity International and Ant Fortune show.

The retirement savings rate is affected by multiple factors, with 76% of the young generation indicating that they began to increase their emergency savings last year, mainly due to the effects of the pandemic.

Meanwhile, compared with those over 35 years of age, the young generation has a higher goal for retirement savings. They expect to save nearly 1.55 million yuan for a good retirement life, which is considerably higher than the target of 1.39 million yuan by people over 35 years of age.

On average, the young generation starts saving for retirement at the age of 31, which is still rather late for them to accumulate savings per their retirement goals.

Though the young generation is making progress in increasing their savings, they still lack sound and adequate investments, according to the survey.

Nearly a quarter of young respondents make cash the primary component for their retirement savings, the survey finds, with 23% of young respondents saying that they lacked the relevant investment skills and knowledge, which made them less inclined to start investing.

Target-date funds (TDFs) aim to provide a one-stop solution to retirement investment for individuals, playing a critical role in retirement investment strategies globally.

However, only 16% of young respondents who already possess investment experience have heard of TDFs, survey findings indicate. Of those who are aware of TDFs, only 25% have invested in them, and a mere 15% claim that they are familiar with them.

China has been accelerating the development of its third-pillar pension system in recent years to enhance retirement security. To support the development of the third pillar of China's pension system, hundreds of pension target funds successfully obtained approval and have been rolled out in China since 2018.

"It is encouraging to see the savings rates among the young generation in China hit new highs,” says Rajeev Mittal, managing director, Asia-Pacific, ex-Japan, Fidelity International. “We believe the establishment of third-pillar personal accounts and the tax incentives to be offered in the future will further encourage Chinese citizens to increase their retirement savings, which will lay a solid foundation for funding their long-term investment habits.”