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05 Jul 2024

When will it stop? Increasing numbers fear they will never be able to afford to retire

Most workers believe they will be less comfortable in retirement due to a shortfall in savings while some say they will never be able to retire at all

When will it stop? Increasing numbers fear they will never be able to afford to retire.jpg

 

The number of people in full-time employment who believe they will never be able to afford to retire because of the impact of the rising cost of living is on the rise, according to research from WEALTH at work. 

Two-fifths (39%) of workers claim they will never be able to afford to stop working, up from a third (33%) twelve months ago, according to the data from the financial wellbeing and retirement specialists.Those aged 35-44 years old are the age group most likely to believe they will never be able to afford to retire, with almost half of workers (46%) thinking this.

The figures also show that rising costs also mean that almost a third (32%) will look to delay retirement, up from a fifth (21%) this time last year.

Working longer to make up shortfall

Eight in ten (81%) are also concerned that it means they will be less comfortable in retirement due to a shortfall in savings, with the same amount (81%) saying they are concerned they will have to work longer to make up for the shortfall.

Four in ten (41%) say they don’t feel supported in their workplace when it comes to getting help to understand their finances. Worryingly, 54% would seek guidance about their pension from someone unqualified like family and friends, or no one at all, and only 14% would speak to their employer.

Jonathan Watts-Lay, director, WEALTH at work, said, “Most people in the 35-40 age group will not have benefited from a full working life of automatic enrolment and are less likely to reach retirement with generous defined benefit (or final salary) pensions than some older generations. In fact, pre auto-enrolment, many in this age group may not have saved into pensions at all, therefore missing a number of years of contributions and growth on those contributions.

“It may not seem important now but preparing your finances for later life is one of the most important things someone can do. Many don’t realise the significant difference a small increase to their pension savings can make,” he added. 

“This is especially true when an employer matches any additional contributions. For example, someone in their 20s, saving just 1% more each year into a workplace pension can boost future savings by 25%. This may not feel affordable but making small changes such as setting a household budget, shopping around and not auto-renewing on things like car insurance, as well as utilising workplace benefits i.e. discount schemes, really can make a huge difference.”

Watts-Lay said those  people approaching retirement should make sure they work out a financial plan, starting by carefully looking at what pensions, savings and investments they have. 

“There are 2.8 million lost pension pots sitting unclaimed because they’ve been lost or forgotten about, so it’s important to track them all down before working out what income you’ll have,” said Watts-Lay. “If people have several pensions and struggle to keep track of them all, it might make sense to consolidate them.”

Watts-Lay adds; “Once someone has a true picture of their finances, they’ll then need to calculate how much they will need in retirement. This can be difficult to estimate but the Pensions and Lifetime Savings Association (PLSA) provide some guidance around this. It estimates a single person will need about:

  • £14,400 a year to achieve the minimum standard of living. This would cover all a retiree’s needs plus a holiday in the UK, eating out about once a month and leisure activities about twice a week; 
  • £31,300 a year for a moderate standard of living (one foreign holiday a year and eating out a few times a month); and 
  • £43,100 a year for a comfortable standard of living (which allows you to be more spontaneous with money, have regular beauty treatments, a foreign holiday and several UK minibreaks a year); 
  • For couples, it’s £22,400, £34,100 and £59,000, respectively.

“If someone is worried that they haven’t saved enough, it may be worth delaying retirement or continuing working part-time. This would enable them to make more pension contributions, and they would be able to take advantage of tax relief and employer contributions for longer to build up their savings,” said Watts-Lay.

“As the research shows, it is very common for people to turn to their friends and family for guidance on their pensions, but they may not be the most qualified or indeed knowledgeable source.

"Many leading employers recognise the need to help their employees improve the way they manage their money and better prepare for later life and therefore provide financial wellbeing support in the workplace. This could include financial education and guidance, as well as access to saving vehicles such as ISAs or Share Plans and also pension consolidation services to help people manage their pension savings effectively,” said Watts-Lay.

“Giving people the opportunity to understand ways to save money, learn about budgeting and how to boost savings and prepare for retirement can make a huge difference to their finances. It’s important for people to speak to their employer to find out what help is available.”

This year’s research for WEALTH at work was conducted by Opinion Matters between 22/05/24 and 23/05/24. 2,019 UK adults aged 22+ in full-time employment were surveyed.

Last year’s research for WEALTH at work was carried out by Opinion Matters between 13/4/23 and 17/04/23. 2,025 UK adults aged 22+ in fulltime employment were surveyed.

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WEALTH at work is a leading financial wellbeing and retirement specialist - helping those in the workplace to improve their financial future.

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