Savers less confident over retirement income, study shows

The study of more than 2,000 people found that 47.8% felt they had much less than they needed for retirement, up from 44.6% in last year’s study.

The index showed that more than half – 53.7% – of respondents felt they would need to delay their retirement, did not know when they would retire, or thought they might never retire.

Only 30.9% of respondents said they were confident of having enough money to retire.

Daniel Taylor, client director at Trafalgar House, said: “Perhaps controversially, it could be considered a good thing that confidence in having enough funds to retire has dropped.

“As an industry we have long worried that the general public haven’t been realistic enough about their retirement pot, grossly underestimating needs and failing to take into account  the cost of living, longer  life spans and an over reliance on state pension provision, all meaning they would be in for a big shock - this would also have a huge impact on economy not to mention social factors.

“It could be argued that if there is an acknowledgement there won’t be enough, more can be done to address that, and earlier.”

The index also showed that public trust in the pensions industry had improved year-on-year, from 4.95 out of 10 to 5.26.

Stronger nudge needed

Despite this fall in confidence, separate research indicates that efforts to improve pension engagement have not had the intended effect.

Last month marked the two-year anniversary of the introduction of the “stronger nudge” to pension guidance. This involved automatically opting people in to taking guidance from Pension Wise when they take or transfer defined contribution benefits, if they are aged 50 or older.

However, new data from the Money and Pensions Service, which was analysed by wealth manager Quilter, has found that the change has had a negligible impact so far.

In the first year following the implementation of the stronger nudge, there were a total of 124,316 Pension Wise guidance sessions attended from June 2022 to May 2023. This represented a 14% increase compared to the 109,054 sessions attended in the year prior to the stronger nudge being introduced.

The analysis also revealed that in the second year, the number of sessions decreased year-on-year to 117,862. This is just 8% higher compared to attendance figures before the enhanced nudge took effect.

Jon Greer, head of retirement policy at Quilter, said: “Though well meaning, the timing of the stronger nudge to pensions guidance comes when many people will already have decided to access their pension savings and have an idea of the action they wish to take. They may therefore view guidance as a barrier to their plans.”

Further reading

Trustees urge focus on pension adequacy after election (18 June 2024)

WTW urges higher default contribution levels to boost saving (29 April 2024)

Auto-enrolment contributions boost ‘could add £10bn a year’ (25 April 2024)