Savers shrug off cost-of-living crisis to increase 'later-life' savings pots

Research from Nottingham Building Society found the number of those saving for later life rose three per cent to 20 per cent, when compared to this time last year.

Bradley Nicholls, chief savings officer at Nottingham Building Society, said: “Savings are crucial for building financial resilience and achieving life goals. 

“These are challenging times as the cost-of-living continues to bite, and so the ability to consistently set aside savings is harder for many people. It’s reassuring to see that saving still remains a priority for the majority. 

“It’s important to remember the value and security that saving now can have in the long run and there are three things to remember.”

Nottingham BS's analysis comes ahead of UK Savings Week; the mutual also revealed 47 per cent are saving up to five per cent of their income now for their future, compared to 35 per cent of the same households this time last year.

The research also found people’s savings goals have shifted over the past 12 months. The proportion saving for an overseas holiday decreased from 37 per cent this time last year to 28 per cent today, while the number of households saving for a new car also decreased by 4 percentage points. 

Defined contribution scheme members 

UK adults are making pension saving a financial priority, despite being squeezed by the cost of living crisis. Just 13 per cent of people have stopped paying into their pension due to the rising cost of living, according to research among 1,300 UK defined contribution (DC) scheme savers by Ignition House for the DC Investment Forum (DCIF).

The research found that nine percent of people were upping their pension contributions – with younger people more likely to be doing this than people who are heading towards retirement.

The crisis is affecting people’s behaviour when it comes to those who are able to draw on their pension, with one in ten over 50s admitting to dipping into their pension specifically due to the rising cost of living, and a further 12 per cent believe that they may need to do so shortly.

“No, I haven’t stopped paying in. I think it’s really, really important … I think if I got to the point where I was cancelling my pension, we’d probably be in quite dire financial straits.”

• Female, aged 22-34

Awareness of responsible investment 'flatlining'

Despite awareness that saving into a pension is important, most members remain uninterested in what’s under the bonnet. While UK consumers are very concerned about the world around them and are taking steps to mitigate their impact, such as flying less or recycling more, most are unaware that how their pension is invested also has implications.

When they were told in qualitative interviews that there is £3bn of money in pensions and that pension money could be a key part of the energy transition, many were surprised.

Awareness of the term ‘responsible investment’ remains static with the proportion of people who say they are very aware of responsible investment hovering at around 18 per cent since 2018.

Members reveal the investments they’d be willing to pay more for

Around half of members (49 per cent) said they would be willing to pay higher fees to invest in green infrastructure projects, provided they had a clear understanding of how it would affect their retirement savings.

DC scheme members said the types of infrastructure they thought pension companies should prioritise included investing in renewable energy sources, followed by improving the efficiency of recycling. Natural capital – both saving existing forests and creating new ones – was another investment priority for members.

Janette Weir, co-founder of Ignition House, said: “It is really encouraging that so many people remain committed to behaving sustainably in their everyday lives. Members are still recycling and see the green transition as vitally important.

“However, the implications of the cost of living crisis – and the geopolitical instability that triggered it – are clear in members’ shifting priorities. For example, energy security, and limiting their own energy usage, was very important to people in this survey. It’s also sad to see emerging evidence which suggests that the 35-44-year-old demographic are less engaged with ESG at present – perhaps due to financial pressures, or the sheer overwhelm of everything going on in the world today.”

Lorna Kennedy, chair of the DCIF, said: “This research shows that, as it stands, members are not making the link between the actions they are taking in their everyday lives to mitigate their impact on the world around them, and their pension savings.

"As an industry, we need to do things differently. When people understand the power of their pension money and how it can be used for good, as well as to deliver an all-important investment return, they become far more engaged.

“As an investment forum, we want to change the conversation. In our future work, we’ll highlight ways in which some pension schemes have brought investment to life for members. We hope this will inspire the wider pensions industry, and prompt us all to do things differently.”