The dream of a comfortable retirement is becoming increasingly elusive for many in the UK, with recent research from Scottish Widows highlighting a significant gap between desired retirement ages and the adequacy of pension savings. More than half (54%) of UK retirees now expect to work longer than they would like, by an average of seven years, revealing a worrying trend in retirement planning.
A Stark Reality for Retirees
The study paints a grim picture: over a quarter (27%) of those who have made retirement plans feel they may never be able to afford to retire. This is indicative of a broader issue where many are not adequately prepared for retirement, with only a third (34%) of respondents feeling they are currently on track. Furthermore, 38% are not meeting even the minimum retirement lifestyle standards as defined by the Pensions and Lifetime Savings Association. This is a 3% increase from last year, equating to an additional 1.2 million people, surpassing the combined working populations of Liverpool and Birmingham.
Aspirations of the Younger Generation
The research also highlights the aspirations of younger people regarding retirement. Those aged 18-29 wish to retire at 61 but are only prepared to work until 64 if necessary, which is still four years short of the age at which they can access their State Pension. This discrepancy underscores the challenges facing younger generations in bridging the gap between their retirement goals and financial realities.
The Cost of Living Crisis
The increasing cost of living is a major factor driving the widening retirement savings gap. With rents rising by 15% while wages have only grown by an average of 6.2%, many are struggling to save adequately for retirement. This financial strain is reflected in the growing number of people who are projected to face poorer retirement outcomes.
Reliance on the State Pension
A significant portion of the population continues to rely heavily on the State Pension. Over half (54%) expect it to form a meaningful part of their retirement income, with three-quarters (75%) considering it crucial for covering everyday necessities. However, there is a palpable concern about the future availability of this support, with 12% doubting it will be available by the time they retire.
Expert Insights
Pete Glancy, Head of Pensions Policy at Scottish Widows, expressed concern over the growing gap in retirement outcomes. He noted, “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.”
Glancy highlighted the importance of integrating private pension pots with State Pension Entitlement for better retirement planning. However, he also emphasized the need for broader financial resilience throughout life, especially for those whose predicted retirement outcomes are significantly lower.
The Role of Financial Advice
Currently, only the wealthiest can afford professional financial advice. Glancy calls for the industry to make financial support more accessible and affordable, stating, “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.”
Conclusion
The increasing delay in retirement for millions of UK workers underscores the urgent need for improved pension savings and financial planning. As the cost of living continues to rise and wages lag behind, it is crucial for individuals to seek professional financial advice and for the industry to provide more accessible support. The new government must also take a holistic view of financial resilience, ensuring that future retirees can achieve the quality of life they hope for in their later years.
