AROUND a third of adults (32 per cent) are failing to invest in order to support their lifestyle in retirement, a new study from Close Brothers Asset Management has found.
This is despite the fact that more than one in three (35 per cent) are concerned about not having enough money in their pension pot to retire and live their desired lifestyle, while more than a quarter (27 per cent) are worried there will not be enough cash available when they retire to cover emergencies.
Even with these worries, more than a third (36 per cent) do not plan to increase the size of their contributions into their pensions, while 15 per cent say they do not plan to retire at all.
The study, released on Monday, found that confusion about the options available is preventing adults from saving and investing effectively. One in five British adults said they were worried about which retirement option would suit them best, with a quarter saying that they found changes to the pension system – such as the introduction of the pension freedoms – confusing.
Interestingly, while engagement with the government’s latest tax-free savings account, the Lifetime ISA (LISA), has been poor, the study suggests this may soon change. While Close Brothers’ study found that a paltry four per cent of those aged 25-34 and three per cent of those aged 18-24 are investing in a LISA, the proportion who plan to do so in the future jump to 14 per cent and 18 per cent respectively.
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David Newman, head of pensions at Close Brothers Asset Management, said that it was crucial to close the gaps in both pension saving and knowledge. He acknowledged that auto enrolment has boosted the number of people contributing to a pension but explained that the amounts being put aside each month are simply not enough.
“Putting aside the bare minimum will not guarantee that the next wave of retirees will have the necessary income in retirement,” he said. “Working in later life should be a choice not a necessity, and it’s a concern that around one in seven people expect never to retire.
“Part and parcel of saving smartly is doing so via the correct vehicle – knowing which will bring the best tax benefits, includes contributions from employers, or is designed for long term investment. Bridging this knowledge gap is central to the long term financial health of prospective retirees.”
Figures from the Department for Work & Pensions last week revealed that the average age of people exiting the work force has increased over the past two decades, while the employment rates of people over the age of 50 have also increased.
Steven Cameron, pensions director at Aegon UK, responded: “Whether out of necessity or choice, more and more people are working past the traditional state pension age, but as the responsibility for retirement saving moves increasingly toward the individual, there are signs that financial security could be a driving force for people spending longer in work.
“One in seven people approach retirement without a private or workplace pension, and there is a real concern that most people in the UK have simply not saved enough to retire at the age they would like.”