Majority of UK adults not confident they will have enough money in retirement
The latest 2024 UK Retirement Confidence Index from Nucleus, one of the UK’s leading adviser platforms, shows the majority of UK adults are not confident they will have enough money in retirement.
- Nucleus UK Retirement Confidence Index is 4.6 with a negative outlook
- Planning and financial advice are key to people feeling more confident about their retirement prospects
- Just 34% of respondents are confident they would have enough money to live comfortably for the rest of their lives
- Over a quarter said they were either slightly less or much less confident about their financial planning retirement prospects following the Budget
- 52% of UK adults underestimate how much they would need each year for a comfortable retirement based on the Pensions and Lifetime Savings Association's (PLSA) definition
- Findings show 20% have not saved anything for retirement and 39% are not contributing to a pension. Alongside this, 44% believe the State Pension will not exist in the future
- 70% of respondents aged 55+ say retirement planning should start in your 20s or earlier
New research from Nucleus’ 2nd UK Retirement Confidence Index has revealed the majority of UK adults are not confident they will have enough money to live comfortably in retirement.
More than 4,300 people aged 18 and above took part in the recent YouGov research looking at retirement confidence levels.
A total of 60% said they are not confident about their retirement prospects. Just over a third (34%) of respondents felt they would have enough money to live comfortably for the rest of their lives, while 6% admitted they are not sure what their financial future could look like at all.
The 2024 Nucleus UK Retirement Confidence Index highlighted that 22% of adults think they will need between £20,000 and £30,000 a year for a comfortable retirement.
This would fall significantly short of the PLSA’s definition2 of ‘comfortable’, which estimates an individual would require an income of £43,100 to achieve the desired lifestyle.
For many, people the figure is likely to be made up of the state pension, private pension and other forms of savings and investment. But just under half (44%) of respondents to the Nucleus study believe the state pension will not exist in the future, while 39% said they are not contributing to their pension provision.
With so much speculation and concern surrounding the 2024 Autumn Budget, Nucleus also took the pulse of the public shortly after the announcement to see how retirement confidence levels were impacted.
An additional 2,100 people took part in this research, with just over a quarter (26%) suggesting they were either slightly less or much less confident about their financial planning retirement prospects.
None of the respondents surveyed were feeling much more confident after the Budget announcement and only 2% said they were feeling slightly more confident.
Retirement Confidence Index
In November 2023, Nucleus launched its first UK Retirement Confidence Index and adults aged 50 and over had a confidence score of 6.9 out of 10 with a negative outlook. Now in its second year, the research has been expanded to a wider age demographic and larger sample size to provide a fuller picture of retirement confidence in all UK adults.
Based on responses to the same central question of how confident people feel about having enough money to live on for the rest of their lives, the updated results reveal an overall confidence score of 4.6 out of 10.
Concerns about what constitutes ‘enough’ are far from being limited to those in or approaching retirement. Understandably those with a longer time horizon until they retire may have other worries about their financial future, amid so much uncertainty.
It is one of the reasons Nucleus continues to call for an independent long-term savings commission. The firm believes there needs to be greater cross-party agreement for pension and savings policy to ensure more people can feel confident about their retirement prospects.
The PLSA’s Retirement Living Standards (RLS) assume people would be mortgage (or rent) free by retirement. Nucleus’ research suggests many do not share the same view with 28% citing rent and mortgage payments as one of the main reasons preventing them from saving more into a workplace or private pension.
High house prices, delayed ownership and other financial challenges may significantly impact the chances of future retirees owning their property outright. The assumption that most retirees have no housing costs is one which may well have to change.
It is also worth noting that the RLS does not factor in other costs such as social care or any tax on pension income and therefore people may have to consider additional expenditure when planning for their retirement.
Other factors preventing people from saving more for later life, include paying off debt (18%) and saving to start/support a family (10%).
Saving to get on the property ladder, student loan deductions, nursery fees and childcare costs are some of the additional immediate concerns for respondents.
Andrew Tully, Technical Services Director at Nucleus, said: “Broadening our study for this year’s Retirement Confidence Index has shone a light on the challenges different generations face when it comes to feeling confident about their financial future.
“One message that comes through loud and clear from our findings is that people need to start planning and saving for later life much, much earlier.
“It’s certainly what our over-50s would tell their younger selves and hopefully what they are telling their children and grandchildren.
“But while the desire is there, many people don’t seem to know where to begin and are finding it difficult to think about the longer-term when they have other more immediate problems to contend with.
“Part of that is due to a lack of understanding, which shows a real need for better financial education to put adults on a good footing.
“Those who do feel more confident about being able to enjoy a comfortable retirement stress the importance of having a plan and seeking quality financial advice.
“The road to a financially secure retirement is paved by making the right choices at the right times. We need to help lay the foundations, so people are ready to take the first step.
“With people potentially underestimating how much they will need, not appreciating how long they might need it for and not saving anywhere near enough, future retirees could be facing a perfect storm.
“It’s in all our interests to get the message out there: when it comes to retirement planning, if you didn’t start yesterday, then today is the next best day.”
The cost of delay
If people do save earlier, it can make a real difference. Younger generations may have competing priorities, but they also have time on their side to plan for retirement.
As an example, if an individual was to start saving for their retirement at age 25 and put £100 towards their pension provision per month, assuming a 5% investment return, this would provide them with a pension pot of approximately £159,818 at age 65. The total amount paid in by the person would be £48,000.
Whereas if they wait until they are 45 and pay £200 per month, they will still have contributed the same amount by age 65 but the pot size is likely to be significantly smaller at approximately £87,174.
ENDS
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Linda Harper (Monday - Wednesday) T: 07876 145309
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