UK adults in denial about retirement saving shortfall

  • Two-thirds are unaware, unwilling or unable to face financial facts
  • Pressure on savings up by 29% for men and 14% for women since 2009
  • Nearly one in ten believe they will have to sell their homes in retirement

Almost two-thirds (65%) of UK adults are unaware, unwilling or unable to address the financial challenges facing them in retirement, according to research by The Equity Release Council.

Examining people’s approaches to financial planning for later life suggests five distinct personality types exist. The 65% who are struggling to save fall into three categories: one in three (30%) are ‘hassled and overstretched’, nearly one in five (19%) are ‘in denial’ about the issue and a further 16% are ‘lost and confused’ about the steps they need to take.

Just 16% of adults show signs of being ‘savvy and sorted’ by taking a conscientious approach to saving for retirement.  A further 19% are ‘cautious optimists’ who appreciate the need for action and are confident they still have time to prepare.

The five ‘retirement saving personalities’ explained:

Looking at common attitudes and approaches to retirement saving, along with people’s future expectations, the UK’s over-18 adult population falls into five main categories:

  • 16% are ‘savvy and sorted’ –

They believe the best way to fund their retirement is by making a conscious effort to save what they can, are prepared to give up luxuries in order to save and are confident they are saving enough.

  • 19% are ‘cautious optimists’:

They expect the country’s economy to improve by the time they reach retirement, are prepared to live a more modest lifestyle but feel they have plenty of time to save and are more focused on enjoying life than worrying about the future.

  • 30% are ‘hassled and overstretched’:

They picture themselves struggling to manage basic costs in retirement, save what they can afford – which may be nothing at all – and feel their best chance of comfort is receiving an inheritance, because it is otherwise impractical to save enough.

  • 19% are ‘in denial’:

They avoid thinking about their future, choose to save a token amount which they believe will add up to enough by the time they retire, and are fed up with being told they need to save more having become immune to bad news.

  • 16% are ‘lost and confused’:

They feel guilty about not saving for retirement, but take no action because they do not understand how much they need to save or which approach offers the best chance of achieving comfort in retirement.

Recent data published by the Office for National Statistics showed that while 76% of UK households currently save into a pension, the amount of savings needed to fund a regular retirement income has grown substantially since December 2009.

In 2013, a savings pot of £458,300 is needed to receive an annual retirement income of £15,000: 29% more for men than was needed in 2009 (when the savings target was £354,100) and 14% more than for women in the same year (when they needed £400,600).*

One in three sees their home as a flexible asset:

The Council research also reveals nearly one in ten (8%) UK adults believe they will eventually have to sell their homes as they will no longer be able to afford to live there in retirement.

With rising house prices and tight lending criteria continuing to limit access to the property ladder, almost one in five (18%) doubt whether they will even own their own homes by the time they retire.

However, nearly one in three (32%) adults see their home as a potential financial asset in retirement, as well as somewhere to live, in case they ever need to release equity to boost their savings.

Nigel Waterson, Chairman of the Equity Release Council said:

“When people’s budgets are under pressure right now, it is perfectly understandable why many prefer to focus on the present and not dwell too much on their financial future, especially if their outlook for retirement is less than sunny.

“Unfortunately, that inaction could prove costly in later life.  Seeking out professional advice on a range of retirement products – from pensions and annuities to equity release – can help to identify the best way to make their financial assets work for them in later life.

“Even without factoring in the current rise in prices, housing wealth is often the logical choice to provide a financial comfort blanket during retirement. Rather than worrying about being forced to sell off what is their most sizeable asset, homeowners can look on their property as a valuable investment that can grant them peace of mind through the safe withdrawal of housing equity.”

 

-Ends-

 

Notes to editors

 

Methodology

The findings used in this release come from independent research carried out in April 2013 by Wriglesworth Research on behalf of the Equity Release Council among 1,000 UK consumers aged 18 to 75.

*Data taken from the Office for National Statistics, Pension Trends Chapter 10: Saving for Retirement, 2013 Edition, 23 April 2013

 

For further information, please contact:

  • Andy Lane or Sinead Meckin, The Wriglesworth Consultancy, on 020 7427 1400 or email thecouncil@wriglesworth.com

 

About The Equity Release Council:

The Equity Release Council was formed in May 2012 – following the expansion of the remit of SHIP (the UK’s equity release trade body for product providers).  The new body now represents providers, advisers, intermediaries, lawyers and other interested parties with all members undertaking to abide by a strict set of principles as well as the code of conduct as originally established by SHIP.

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