Increasing number of workers fear they will never be able to afford to retire.

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, with two fifths (39%) of workers claiming they will never be able to afford to stop working, up from one in three (33%) twelve months ago.

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 from financial wellbeing and retirement specialists, WEALTH at work, 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.

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, comments;

“Many are concerned if they will ever be able to afford to retire or believe that they will have to delay their retirement, but the research has found that the most concerned are people aged 35 to 44.”

He explains; “Most of this 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.”

Watts-Lay adds; “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. 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%[1]. 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.”

He comments; “Those who are 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. 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. 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, as well as being able to do more of the things you want to do ); 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.

He continues, “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.”

Watts-Lay comments; “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 programmes, as well as access to savings vehicles such as Workplace ISAs or Share Plans and also pension consolidation services to help people manage their pension savings effectively.”

He explains; “Financial education seminars and webinars are useful in terms of helping employees gain a general understanding of their options, whilst one-to-one financial guidance via personal financial coaches allows people to clarify their own financial situation and gain a deeper level of knowledge around their options.

Financial guidance is particularly beneficial for individuals at retirement when faced with complex decisions around how to best access their pensions and retirement savings. It can act as a gateway to regulated advice for those who would benefit from it, as it can help them recognise all the complex things they need to understand about their finances. In doing so, they may then realise that they need specialist advice.

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.”

Watts-Lay comments; “An increasing number of employers are now turning to specialist financial wellbeing and retirement service providers to bring all this support together. Taking an active approach and supporting employees with the help of reputable firms will make the whole process far more robust. However, before proceeding with a provider, carrying out due diligence is crucial. It is essential to check that providers of financial education and guidance are workplace specialists with experience in providing support to employees. Due diligence on advice firms should cover areas such as qualifications of advisers, the regulatory record of the firm, compliance process, pricing structure, and experience of working with employers. Ultimately, empowering employees by providing them with access to appropriate support at the right time can improve financial capability which should result in better outcomes for all.”

Notes to editors:
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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