Expert reveals tips on how to save for retirement
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As the UK grapples with rising cost of living, fresh concerns have been raised that up to 18 million people are not adequately preparing financially for later life. Nearly half the population is not confident about their ability to save enough for retirement, according to Phoenix Insights.
Even before the current cost-of-living crisis, two in five people said they could not afford to put aside enough money for older age, while one in five stated that paying off debts was preventing them from saving.
Two in five (41 percent) adults expect to use some or all of their savings to cover the cost-of-living crisis, while 14 percent have no savings to use at all.
The impact of rising inflation, increased energy tariffs, as well as higher National Insurance bills for many Britons from April appears to be having a significant impact, with 27 percent of people saying they will be forced to save less money for the future.
These issues could be made worse by the fact the life expectancy for Britons has increased over the years.
Worryingly, one in four people are not confident in their ability to secure work and are concerned factors like ill health, discrimination or the wrong skills will stop them from earning and saving what they need for retirement.
Though a majority still expects to retire before the state pension age of 66, a large proportion expects to work into their late sixties and beyond.
Phoenix Insights has warned that if action is not taken now, millions may face serious challenges later in life that will only be exacerbated by the current cost-of-living pressures.
The think tank has called on the Government and employers to initiate a range of new measures to combat these issues.
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The suggestions include investing in mid-life retraining, supporting age-inclusive workplaces, bolstering access to pension advice at a younger age and expanding auto-enrolment to the self-employed.
Catherine Foot, Director of Phoenix Insights, said: “Living longer is one of the greatest gifts of the 21st century and we all want to make the most of it. But our report reveals it’s a serious fear for nearly half of us.
“Millions of people are concerned they may be unable to support themselves financially in later life and are not confident they can act now to improve their financial future. This could leave millions of people facing serious challenges later in life.
“Part of the problem is that we still seem to be living with a mid-20th century model of life, yet so much has changed.
“Many of us in the UK will spend a third or even more of our adult life over the age of 65 – but it’s going to be hard for lots of us to sustain what could be a 30-year retirement or more from only 40 years of working.”
Becky O’Connor, Head of Pensions and Savings at pensions platform interactive investor, said: “For millions of people, the thought of retirement is like staring into an abyss. They have no idea how or whether they will get through it with enough income to last.
“Many don’t know how to go about getting on track and feel totally hamstrung by the insufficiency of their income to deal with present living costs, let alone those they will face in the future.
“The cost of living crisis is making saving for the long term even harder to prioritise. How can you think about 10 years’ time when you aren’t sure how to get to the end of this month?
“Unfortunately, many people think they will be OK just because they are paying into a pension through work or have done so in the past. They have been lulled into a false sense of security. Workplace provision at the minimum level of eight percent of earnings is not going to be enough to deliver a decent retirement income for most people.”
Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown, added: “Increasing financial pressures and living longer means the traditional model of retiring at 65 no longer works for many people – we need a more flexible approach.
“Auto-enrolment has done a great job in getting more people contributing to a pension but it needs to be expanded to help more people save more for longer and we would like to see Government act on its recommendation to reduce the minimum age for auto-enrolment from 22 to 18 and remove lower earnings limits so people contribute from the first pound of their earnings.
“The key is to get to a point where people have always contributed to a pension throughout their working life and it becomes normalised.”
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