Retirement perceptions in the UK

It is now a decade since the introduction of auto-enrollment in the UK, which has seen millions of people saving for retirement for the first time and opt-out rates below 10%. However, despite the initiative’s success millions are still undersaving, due in many cases to working part-time or being in low-paid jobs. Addressing this may become more difficult now that a cost of living crisis has taken hold in the UK.

Our survey was conducted at a time of particular economic turmoil in the country, as the pound crashed and political leadership changed swiftly. Inflation and rising costs are impacting people’s day-to-day spending and wider budgeting, and it is possible that this will shift focus away from long-term saving towards short-term expenses.

The knowledge gap remains among those nearest retirement

There remains a significant gap in UK respondents’ knowledge of retirement planning but it is showing signs of shrinking.

Almost one in three (29%) don’t have a clear understanding of the options available to them in retirement. This is down from 39% in our previous survey, but still a significant proportion of UK respondents. The drop in the number who feel they lack a clear understanding is driven by younger respondents, suggesting the possible success of industry efforts to educate younger people as well as the continued positive impact of auto-enrollment.

Among those closer to retirement age, understanding remains consistent with 2021’s figures. One in five (19%) of those aged 55+ still do not have a clear understanding of their retirement options.

When UK respondents seek advice, their go-to sources are a financial adviser, a government website and retirement plan providers. In practice, though, these are not all considered the most useful – friends and family are among their top three most useful sources of information about retirement finances, while retirement plan providers are not.

‘Retirement’ is now seen as a fluid concept

People in the UK see retirement as a gradual process

Gone is the idea of reaching a certain age and suddenly stopping work. Around half (47%) of UK respondents see retirement as a transition, rather than a one-off event. This view is more prevalent among women – more than half (51%) see retirement as a transition compared to 43% of men. Unsurprisingly, it becomes more common the closer people get to retirement, jumping from 37% of 18-24 year olds to 58% of 65+ year olds.

Living costs are becoming a harsh reality

As the cost of living crisis bites, concerns about meeting day-to-day costs in retirement have risen

In 2021, UK respondents’ biggest concern was about having to limit their lifestyle in retirement. This year, their biggest worry is about meeting basic everyday costs.

These concerns are heightened for young people and for women. One in five young people (18-25) are concerned about being able to afford housing in retirement, compared to just one in ten of their 65+ year old counterparts. And 38% of women are concerned about having enough money for day-to-day living expenses in retirement, compared to 31% of men.

While many expect their living costs to decrease in retirement – perhaps due to slower lifestyles, or anticipating having paid off their mortgage – more than a quarter (28%) expect their expenses to increase. More than half (57%) plan to supplement their retirement savings with other forms of income – for example, through personal savings (28%) or continued employment (18%).

This is particularly true for younger generations. Just 43% of 18-34 year olds expect their retirement to be at least partly funded through a state pension, compared to 63% of those aged 55+. And 42% of 18-34 year olds expect their retirement to be funded by a private pension, compared to 56% of 55+ year olds. This is concerning, given the UK’s aging population and the fact the state pension is considered too little to live on.

People want control and simplicity

Pension offerings need to provide autonomy while also being straightforward

The most important thing that UK respondents want from their retirement savings provider is clear and simple communication, with 36% considering this important. Their desire for retirement plan solutions to be straightforward and easy to understand is unsurprising, given the knowledge gap we have already seen.

Control is also important to UK respondents – their other priorities when looking for a retirement plan provider include the opportunity to withdraw lump sums as needed (34%), and the option of changing income amounts (28%).

Online access and savings management

In response to the question ‘How important is it to you, if at all, that you will be able to manage your retirement finances online?’, 60% consider it fairly or very important to be able to do so. This figure increases to 72% when excluding those who answered ‘Don’t know’.

Despite – or, perhaps, because of – UK respondents’ limited understanding of their retirement finance options compared with savers in other regions, they are the most keen to manage their own retirement savings entirely single-handedly. More than a third (38%) favor this approach, rather than having some assistance in managing their finances. Just 8% would leave it entirely to someone else.