‘Sleepwalking into a crisis’: Savers fear unaffordable retirement

New research from the pension provider found that 38% of people it polled were not on track to afford the minimum level of the Pensions and Lifetime Savings Association’s (PLSA) Retirement Living Standards.

This was up from 35% when Scottish Widows conducted the same research last year.

Only a third (34%) of the 5,072 people surveyed felt they were adequately financially prepared for retirement.

The rising cost of living – including increasing rental costs – was largely behind the fall in confidence, while wage growth has failed to keep pace.

Pete Glancy, head of pensions policy at Scottish Widows, said: “The growing gap in retirement outcomes and people’s quality of later life, between those who are currently retired and those who will retire in the future, is of great concern…

“It is likely to be a long time before Britain has been saving enough to give future pensioners the outcomes they hope for. In the meantime, helping people to make the very most of what they have is going to be critical.

“It’s the right moment for the new government to take a holistic view on people’s financial resilience throughout life, paying particular attention to those whose retirement outcomes are predicted to be much lower.”

Highlights from the research

The findings echo research from Trafalgar House, published last month, that also showed a falling level of confidence among savers in achieving a comfortable retirement.

Scottish Widows also found that three quarters (75%) of retirees relied heavily on the state pension for meeting day-to-day expenses.

• Most respondents wanted to retire at 62, while those aged 18-29 wanted to retire at 61 – seven years before they will currently be able to access their state pension.

• More than half (54%) worry that they will have to work longer than planned to afford retirement.

• More than a quarter (27%) feel they will never be able to retire.

“At present only the wealthiest tend to rely on professional support from a qualified financial adviser,” Glancy said. “As an industry, we need to find a way to give people better support in making good financial decisions at a price more savers are willing and able to pay.”

‘Sleepwalking into a crisis’

Brian Byrnes, head of personal finance at fintech company Moneybox, warned that the UK was “sleepwalking into a retirement crisis”, and echoed Glancy’s call for greater access to financial advice and guidance.

He added: “Without systemic changes to how we interact with consumers now, many are inevitably facing into a future where they will not have enough saved for a comfortable retirement.”

Moneybox’s own research has found that just 10% of people it surveyed were “very confident” of achieving a comfortable retirement, while only one in five said they knew how much they needed to reach an “ideal income”.

Paul Leandro, partner at Barnett Waddingham said the research painted “a worrying picture for future retirees”.

“Time and time again, research has pointed to the inadequacy of pensions contributions across all age groups, and until there is a significant increase the situation will only worsen,” Leandro said.

“This is particularly concerning as defined contribution, or workplace, pensions have become the main source of retirement savings for a significant proportion of the population, and means real change will be needed if people are to have the retirement they desire.”

While the newly launched Pensions Review will explore adequacy issues in its second phase, scheduled for later this year, Leandro warned that “the longer the delays, the more the risk that future cohorts of people will not have secure or dignified retirements”.

Further reading

Chancellor fires starting gun on Pensions Review (22 July 2024)

‘Challenging balance to strike’: Industry reacts to Pensions Review (22 July 2024)

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