Looking forward to a comfortable retirement

August 15, 2019 Elizabeth Eyre

Personally, I can't wait to retire. I've been working since I was 19 (since 13 if you count all the summer and Saturday jobs I had when I was at school and the work experience I did while I was at college) and, frankly, I'm ready for a rest.

I've got my retirement all planned out - returning to my home town on the Yorkshire coast and spending my days walking my dogs on the cliffs, enjoying the pensioners special at the fish and chip shop every Saturday lunchtime, and having the occasional day out in t'smoke - and now it's finally hoving into view, I'm filling in the details and creating a glorious picture of what my post-work life will be like.

But, although I'm excited at the prospect of being a pensioner (now there's something I never thought I'd say!), I'm also a bit worried about where the money's going to come from. I'm very engaged with retirement but I've never been engaged with my pension. I'm more of a "living for the moment" type of person than a "preparing for the future" one and even saving for next Christmas is a challenge, so saving for something that wouldn't happen for half a century was almost impossible to get my head round when I joined the fulltime workforce as a teenager. 

So it was late when I finally realised the importance of making contributions and, having moved around a lot during my career, I now have a variety of personal and company pensions that I've lost track of. I don't know how much is in them, how much income they'll provide once I've retired, what kind of pensions they are, or even whether I'm still putting money into some of them. 

I don't even know how much I actually need to have in my pension pot to have enough income for a comfortable retirement - nothing fancy, just a time to relax, potter and do the things I like to do without worrying about my financial situation. 

There's still time for me to win the lottery, of course, but, failing that, I really ought to take up my employer's offer of expert help before it's too late. I might have time to grow my pension pot to the right size, I might not. If I can't, I'm lucky enough to do the kind of work that I could keep doing after I've retired and be able to fit it around the dog walking and the fish-and-chip eating; it wouldn't be my ideal retirement scenario, but it would keep the wolf from the door. 

Indifference and confusion

This is very much my own personal situation, but I'm not alone. There are a lot of people in the UK feeling indifferent, confused, powerless, disengaged and worried about their pensions - and they're crying out for help and support from their employers so that they, too, can enjoy a comfortable retirement. 

They try not to think about their pension at all or they're worried that they're not saving enough to retire comfortably. They're confused about how much they should be saving and about the different kinds of pensions that are available. And they want more transparency about shortfalls in company pensions and advice on what to do about them. 

To make matters worse, we're in the midst of a very difficult period for pensions generally. The state pension age is set to rise to 67 by 2028 and further changes are likely in the future; almost a fifth of current pensioners are living in relative poverty before housing costs[1]; and the national auto-enrolment pensions scheme is failing to come anywhere close to reversing the shortfalls in savings made by people working today[2].

On top of this, huge changes in working patterns and behaviours are exposing gaps in the current thinking about pensions. The explosion of the gig economy, for example, has seen an increase of one million self-employed workers over the past decade, only a third of which are paying into a pension [3].

The statistical story

We talked to more than 2,000 employees to find out how aware of their pension savings and shortfalls they are, and how anxious it's making them. We found that a significant number of them are - just like me - simply not engaged with their pension savings and have switched off from thinking about their retirement, either through a lack of understanding or an unwillingness to face up to hard truths. 

But most want a comfortable retirement and accept that they have a personal responsibility to act to achieve this. They have a real appetite for addressing pensions shortfalls and for working with their employers to find solutions. 

The statistics set out in our white paper, The future face of retirement: Re-thinking pensions provision for the future workforce, tell the story. 

The people we talked to typically feel indifferent (43%) or powerless (42%) about retirement. They're most worried about not having saved enough to comfortably retire (83%), not contributing enough to their pension (77%) and not understanding enough about pensions to make the right decisions (77%).

72% aren't engaged with their company pension, and 57% admit that they don't think about retirement or their pensions as often as they should. 38% say they'll delay thinking about pensions for as long as they can.

Our research has revealed quite a high level of ignorance around pensions. 61% of employees say they're confused by pensions - 74% don't understand the differences between Defined Contribution, Defined Benefit, master trusts and other pension arrangements. 59% don't know how much they should be putting into their pension and 34% admit they have no idea how much they currently have saved. 

Help and support

That's the bad news. The good news is that they want to learn more and be able to take more control of their pensions - 84% want to understand how much they need to save to be able to enjoy a comfortable retirement. And this is necessary, since 60% believe that the minimum contributions for auto-enrolment will provide them with the income they'll need. 

This perhaps isn't surprising when you consider that 35% of employees get no help with managing their personal finances from their employer. 32% say their employer provides access to financial advice, but just 12% say their employer provides education or training on pensions and retirement options. Almost half (47%) say their employers should be doing more to help them to manage their personal finances, and 35% think that providing more education or training is the best way to get them to engage with their pensions. 

They also want their employer and the government to be more supportive - 68% want their employers to encourage them to maximise their contributions and the same number say the government should increase the minimum contribution to auto-enrollment pensions. They're almost unanimous (93%) on the need for employers to be more transparent about shortfalls in pensions savings - 41% want their employers to be more open and to give them advice on how to close the gap - and 94% think that a pensions dashboard would be useful. 

Ultimately, employees acknowledge that they're responsible for making sure they save enough for their retirement but it's in everyone's interest - employee, employer and government - to make sure that happens before it's too late. 

Download your copy of The future face of retirement: Re-thinking pensions provision for the future workforce here.

[1] Department for Work and Pensions, Households Below Average Income, 2018

[2] Office for National Statistics, Annual Survey of Hours and Earnings: 2017 provisional and 2018 revised results, 2018

[3] Office for National Statistics, Trends in self-employment in the UK, 2018

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