Retirement Finance Crisis Looming For The UK
Tuesday, November 22, 2011

Half of the UK's population are failing to save for retirement, resulting in a ticking time bomb for the country's long-term financial future, according to a new survey.

The fourth annual Financial Planning Survey, commissioned by the Institute of Financial Planning (IFP) in association with National Savings and Investments, discovered that the retirement plans of many now hang in the balance as they struggle to pay down debt while worrying about their financial future. The survey was conducted for the UK Financial Planning Week, which began on November 21, and questioned over 2,000 people across the UK.

The survey found that, despite concerns over their future standard of living in retirement, many people are not planning to put money into pension plans to try to improve their position, or may not even be aware that they need to. Just 41% said they would consider making additional contributions into pension plans to avoid delaying their retirement due to the planned increases in the state retirement age.

In 2009, 22% reported that they were not saving anything at all. By 2010 this had increased to 24% but by 2011, 30% fall into this category. This year, only 19% of respondents believed that they are saving enough for their future needs. When asked what they are saving for, retirement was the most widely cited by approximately a third of respondents, (33% in 2011 - compared to 42% in 2010, 32% in 2009) followed by a holiday (21% - compared to 26% in 2010, 26% in 2009), and a contingency fund was the third most popular (22% in 2011- compared to 30% in 2009, 23% in 2010).

Almost half (47%) of those questioned were not confident that they’ve saved enough to live comfortably when they retire. Women are particularly at risk with the majority (55%) falling into this category. 14% have never made any pension contributions, and a further 31% are not currently contributing to a pension plan of any sort. In addition, two thirds (66%) of women and over half (54%) of men said they worry about money either always or most of the time.

When asked about their day to day budgeting, it appears that many people are feeling the pinch: 29% of men and 22% of women surveyed reported they are not even setting out a clear budget, compared to 30% of men and 25% of women last year. 53% of respondents noted that their household finances have got either a bit or much worse over the last six months compared to just 43% in the same period last year. Just 14% of women and 23% of men reported that they were satisfied with their current financial position compared to 21% of men 13% of women in 2010.

Looking ahead to what age the panellists think they will be able to afford to retire, 10% think they will “never” be able to, including a worrying 12% of over 55s.

Nick Cann, CEO of IFP commented: “These findings present a worrying picture for so many people who are facing an uncertain future yet not taking appropriate steps to improve their situation. There seems to be awareness but no link to action. Financial Planners can help but the challenge is to ensure a greater engagement with the consumer so that they have confidence in the route that they are taking. During Financial Planning Week we’re providing practical tips, tools and information that people can use to improve their finances and get a clearer understanding of the choices that they have.”

John Prout, Retail Customer Director at NS&I, added: “Financial Planning Week highlights the importance for all of us to properly plan our finances, all the more so when money is tight for many people. Reviewing our finances, either for the short or long-term, can take many forms, beginning at home by seeking advice from family role models, by contacting organisations such as the Money Advice Service or through paid professional advice. The key is to encourage everybody to plan their finances and to really demonstrate the benefits of doing so, for example in saving money through switching their utility provider.”

Financial Planning Week is the national campaign organised by the IFP to raise awareness amongst the general public of the importance of financial planning. The campaign aims to encourage people to take action to improve their financial 'fitness' and help them achieve the life they want. It also helps them to find quality professional Financial Planning help should they require it.