Retirement confidence is on the rise but overconfidence carries risks

Couple looking at laptop
  • 52% of people feel confident about their ability to retire comfortably – this has edged upwards since 2017 (48%)
  • However, one in ten (10%) don’t have any pension savings
  • A quarter (25%) of those with pension savings don’t know how much they hold in pensions
  • 36% have never estimated their income needs for retirement

To mark the start of Pension Awareness Week, Aegon has conducted new research*.

The Retirement Confidence Survey reveals that people in the UK are feeling slightly more confident about their ability to retire comfortably, than they did two years ago. Latest figures show just over half now feel confident about their ability to retire comfortably, compared to just under a half in 2017.

However, while retirement confidence appears to be improving, many remain in the dark when it comes to their pension savings and arrangements for funding their retirement.

One in ten (10%) of those polled admit that they don’t have any pension savings.

36% have never estimated their income needs for retirement, putting themselves at significant risk of being unable to maintain their existing lifestyle. While it’s encouraging that this has reduced since 2017 from 43% to 36%, the pace of change needs to accelerate to make a real difference.

A quarter (25%) of those with pension savings said that they don’t know how much they hold in pensions. This is highest among those aged 35 – 54 (30%). And while only 19% of 55-64 year olds don’t know how much they have in pensions at the moment, it’s still significant considering how close they are to retirement.

Steven Cameron, Pensions Director at Aegon, comments:

“It’s encouraging to see an indication of growing confidence over the last two years when it comes to being able to retire comfortably.

“Pensions have frequently hit the news headlines in the last few years. While at times this has been for less good reasons, there have been lots of positive stories such as the success of automatic enrolment and the new retirement flexibilities under pension freedoms which have been built on by initiatives such as the Pensions Awareness campaign from Pension Geeks. All of this has contributed to raising the profile of retirement planning, leading to people taking more interest and action, improving the confidence people have when it comes to being able to retire comfortably.

“But we must remain realistic. Overconfidence carries risks and people mustn’t be lulled into a false sense of security. While auto-enrolment means millions of employees are saving more for retirement, that doesn’t mean they’re on target for the retirement they aspire to or to maintain their pre-retirement standard of living. Furthermore, the growing population of self-employed are excluded from auto-enrolment and can’t rely on an employer to support their retirement funding. Realistically, there’s a lot more required to make sure you’ve saved enough for the retirement you would like.

“It’s also worrying that a significant minority of people don’t know how much they have in their pension. Those in the 30 to 54 age band are in the best position to take action now to make a big difference to their retirement income. Whatever your age or circumstances, finding out more about your pension funds and prospects can only be a good thing.”

 

Tips to Building Retirement Confidence

  1. Act now, make a plan and start saving.

Unlike a mortgage or a car, you can’t borrow for retirement. You need to make a plan for retirement, and take action so you aren’t caught short. And the sooner you start the longer your savings have to grow.

The more savings you have, the more choice you have at retirement. So work out how much money you might need when you retire. A good place to start is by basing your financial needs in retirement on your current lifestyle and adapting it to suit the “retired” you. There are online tools available to help you do this or for a personalised picture, seek financial advice.

Your older self will thank you for it later when you can afford to travel, eat out, take up hobbies, buy cars and handle any unexpected expenses.

  1. Patience could pay – retire later

Think carefully about your planned retirement age. You may have 60 or 65 fixed in your mind, but being flexible may give you more time to build up enough savings so that you can actually enjoy your retirement in comfort and not be forced to scrimp too much.

For some, working beyond ‘traditional’ retirement age could be the answer to making up a shortfall in pension savings. And an increasing number are choosing to do so not simply for financial reasons but to keep active and for social reasons. Working a few years longer while continuing to save in a pension can dramatically improve retirement incomes. There can be a triple boost of continued investment growth on the pension fund, further contributions being added and ultimately fewer years to spread the fund over once no longer working.

  1. Get the full picture. Find out what State pension you will get

Check your state pension entitlement and state pension age. This way you’ll know exactly how much you can expect to receive and from when. This will help you work out how much extra you need to save yourself in a pension. Due to the complexities of the system, different people will have built up different entitlements and not everyone is eligible for the full new flat rate state pension. Get a State pension forecast online https://www.gov.uk/check-state-pension or ring the Future Pensions Centre helpline on 0345 3000 168. You need to pay 35 years of full rate National Insurance Contributions to get the full State Pension. Find out if you have any gaps in your national insurance contributions and how you can fill those gaps.  https://www.gov.uk/check-national-insurance-record

  1. Keep track of old pension pots

Multiple jobs with different companies means that a lot of people now have more than one pension and it has become easy to lose track of some pension savings. It’s very hard to plan your retirement without a full view of your savings and it’s important everyone has a clear idea of how much their overall pensions are worth and what their state pension entitlement is likely to be.

If you’re not sure whether an old job came with a pension then it’s definitely worth checking. The government offers a pension tracing service which can be found here www.gov.uk/find-pension-contact-details    

Once you have tracked down all your pensions you could consider combining them with one pension provider. However, there are pros and cons of consolidation and this is one area where professional financial advice will really add value.

  1. Review your investments

It’s important to keep track of how the investments within your pension fund are performing and assess whether you might be better off moving to a different investment fund.

When you join a workplace pension your contributions are put into the “default fund”. This is designed to be broadly appropriate for members generally. You might want to consider an investment approach that’s more tailored to your needs. Investment can be daunting for some people but it’s a topic financial advisers can help with. You can find an adviser through www.unbiased.co.uk

  1. Get professional advice

Planning a retirement income and when to start taking it requires careful consideration and a financial adviser can provide tailored advice to meet your personal needs and circumstances.

 

References

*The Aegon Retirement Confidence Survey is a bi-annual tracker study that assesses confidence to retire comfortably among a nationally representative sample of UK residents that are not yet retired. The 830 respondents who took part in this study were recruited through Aegon’s customer and consumer panels. Fieldwork was undertaken in July 2019.

 

Further information

Stephanie Melrose

PR Manager

Aegon UK

stephanie.melrose@aegon.co.uk

Tel: 0131 549 6743

Mob: 07740897621

 

Notes to Editors

As with all investments, the value can fall as well as rise and isn’t guaranteed. Customers could get back less than originally invested.

  • In the UK, Aegon offers retirement, workplace savings and protection solutions to over three million customers. Aegon employs around 2000 people in the UK and together with a further 800 people employed by Atos, we serve the needs of our customers. More information: aegon.co.uk
  • As an international life insurance, pensions and asset management group based in The Hague, Aegon has businesses in over twenty five markets in the Americas, Europe and Asia. Aegon companies employ over 28,000 people and have millions of customers across the globe. Further information: aegon.com

*Figures correct as of August 2019