Retirement Report: Delayed retirement now likely for millions – experts respond

Delayed retirement now likely for millions as UK pension savings gap widens – Scottish Widows’ 20th annual Retirement Report

• The percentage of people not on track for even a minimum retirement lifestyle has
  worsened, from 35% to 38% since 2023, equating to an extra 1.2m people
• Most people would like retire at the age of 62, but 54% think they will have to work
  longer than they would like, on average by seven years, and 27% don’t feel they will
  ever be able to retire
• The State Pension plays a vital role in meeting day-to-day costs for 75% of current
  retirees, but future retirees are worried it may not be there to benefit them

More than half (54%) of UK retirees expect to work longer than they would like, on average by
seven years, highlighting a worrying gap between people’s desired retirement age and the
adequacy of pension savings. In addition to that, over a quarter (27%) of those who have
made retirement plans don’t feel that they would ever be able to afford to do it.

Scottish Widows’ 20th annual Retirement Report also shows that younger people would like
to retire even earlier, with those aged 18-29 wanting to retire at 61 and only prepared to work
until they reach 64 if necessary – four years short of the age at which they will be able to access
their State Pension.

Only a third (34%) of respondents think they are currently preparing adequately for retirement,
and 38% are not on track for what the Pensions and Lifetime Savings Association deems as
even a minimum retirement lifestyle. This is 3% higher than last year and is equivalent to an
additional 1.2m people in that situation, more than the working populations of Liverpool and
Birmingham combined.

The increase in those projected to suffer the poorest retirement outcomes has been driven by
rises in the cost of living (for example rents which have gone up by 15% 2) relative to the growth
in wages at an average of just 6.2%.

Survey respondents also emphasised people’s reliance on the State Pension. Just over half
(54%) expect the State Pension to eventually form a meaningful portion of their retirement
income, with three quarters (75%) calling it hugely important in helping them pay for everyday
necessities. However 12% of people are not convinced this level of help will be available to
them by the time they retire.

Pete Glancy, Head of Pensions Policy at Scottish Widows, said: “The growing gap in
retirement outcomes and people’s quality of later life, between those who are currently retired
and those who will retire in the future, is of great concern.

“However, people are starting to think about how their private pension pot might interact with
their State Pension Entitlement to plan their retirement. But, there is still a real reliance on the State Pension, and while some will be able to use their private pension pot to give them the
flexibility they are looking for in terms of retirement age, it’s only starting to dawn on others
that they may end up working for much longer.

“It is likely to be a long time before Britain has been saving enough to give future pensioners
the outcomes they hope for. In the meantime, helping people to make the very most of what
they have is going to be critical. It’s the right moment for the new government to take a holistic
view on people’s financial resilience throughout life, paying particular attention to those whose
retirement outcomes are predicted to be much lower.

“At present only the wealthiest tend to rely on professional support from a qualified financial
adviser. As an industry, we need to find a way to give people better support in making good
financial decisions at a price more savers are willing and able to pay.”
Thinking about her own retirement experience and future career plans is British former longdistance runner and marathon world record holder, Paula Radcliffe MBE. Paula hung up her
professional running shoes in her forties and is supporting the launch of the Retirement
Report.

Paula Radcliffe MBE commented: “I hung up my running trainers and experienced
retirement much earlier in life than many people do and when you reach that moment, it comes
with a wealth of emotional hurdles. Excitement, fear, apprehension were all things I
experienced and it can be scary to think about what comes next. I was incredibly lucky that I
had good advice and started saving for my future from the start. This gave me the financial
security and time to think carefully about what I wanted to do.

“With people expecting to work later into life, it’s important to think about what that next chapter
holds and do it early. It might be pursuing work that aligns with your passions or thinking about
what will give you flexibility to spend time with loved ones. Whatever it is, keep that important
eye on your finances. Aligning these priorities will mean that work will be more likely to support
you, rather than frustrate you, throughout your life.”

Experts respond:

“We’re yet to defuse the ‘ticking timebomb’ that is the UK’s pension system”

Paul Leandro, Partner, Barnett Waddingham says: “This research paints a worrying picture for future retirees, and is a stark reminder that we’re yet to defuse the ‘ticking timebomb’ that is the UK’s pension system.

“Time and time again, research has pointed to the inadequacy of pensions contributions across all age groups, and until there is a significant increase the situation will only worsen. This is particularly concerning as Defined Contribution, or workplace, pensions have become the main source of retirement savings for a significant proportion of the population, and means real change will be needed if people are to have the retirement they desire.

“Various research suggests that realistically people should be saving on average around 12 per cent or more of their annual income into their pension pot, however actual levels are often far below this even when taking into account employer contributions. And more often than not, this is not done out of intention – but a lack of awareness and engagement.”

“The recently announced pensions review offers some hope that things will change, but the concern is about timing.  Pension inadequacy, whilst on the list, is a secondary priority for the review.  The longer the delays, the more the risk that future cohorts of people will not have secure or dignified retirements.”

“We are sleepwalking into a retirement crisis […] many are inevitably facing a future where they will not have enough saved for a comfortable retirement.”

Brian Byrnes, Head of Personal Finance at Moneybox comments: “We are sleepwalking into a retirement crisis, and without systemic changes to how we interact with consumers now, many are inevitably facing into a future where they will not have enough saved for a comfortable retirement.

“Our research earlier this year found that just one in ten people are very confident that they are on track for a comfortable retirement, and only 21% have worked out how much they would need to save in order to achieve their ideal income in retirement.

“Just 10% of those aged between 45 and 54 have sought out professional advice to help them prepare for retirement, suggesting that many could be heading into retirement without the necessary information or support needed to prepare adequately.

Financial advice continues to be inaccessible to the vast majority and in many cases is a privilege afforded only to the wealthy and so it is vital more is done to guide and support people as they learn how to plan their finances for the future with greater confidence.

The FCA and HMT’s Advice Guidance Boundary Review has the potential to truly transform how people are supported to take control of planning for retirement earlier in life and make financial decisions with greater confidence. Moneybox has been campaigning to ensure the industry seizes this opportunity to revolutionise consumer finances and close the financial advice gap, now and for generations to come.”

A painful reminder that the UK pensions system is hanging by a thread

Lily Megson, Policy Director at My Pension Expert, said, “Figures like this are nothing new, yet they remain a painful reminder that the UK pensions system is hanging by a thread.
 
“It’s particularly worrying that so many feel they’ll have to extend their working lives significantly – or worse, even indefinitely. People deserve a comfortable retirement at the end of their working life, and this signals a failure in our current system to provide adequate support and resources for savers.
 
“It is also glaring evidence of the need to carry out the recently launched pension review with precision and, most of all, urgency. Tackling pension engagement, increasing access to financial education, and providing advice are crucial areas which the new Government must cover. Doing so will be a positive step in  restoring financial confidence and equipping people with the tools and knowledge they need to secure a comfortable retirement.”