Almost nine in 10 (86 per cent) savers are not on track to achieve the standard of retirement that they currently expect, according to research from Phoenix Group.
Speaking at the PLSA Annual Conference 2022, Standard Life, part of Phoenix Group, head of social affairs, Mary Bright, stated that “86 per cent of savers are either not on track for what they want or are not going to be able to get on track for what they want”.
Bright highlighted the findings of recent research from Phoenix Group, which divided UK savers into five groups, only one of which it expects to reach a retirement income above the minimum standard.
The “financially struggling”, who represent 15 per cent of DC savers, are people with lower resources in working life and are more likely to be on low incomes or expect to rent in retirement.
The “unsure”, representing 19 per cent of DC savers, are described as being “disadvantaged by not engaging with pension decisions”, while “undersavers”, representing 40 per cent of DC savers, expect the PLSA’s minimum income but are not on track to achieve it.
"Downgraders" (12 per cent of DC savers) were the only group who expect at least the PLSA’s minimum income and are on track to achieve this, although they did not expect that income to be sufficient to maintain their pre-retirement standard.
Later in the panel, Bright discussed potential solutions to the large number of people not on track to achieve their retirement expectations, clarifying that it is not as simple as saving more or working longer .
“If you’re at the beginning of your career saving 12 per cent can make a big difference but beyond that its simply not enough. Saving 2 per cent more makes very little difference. Saving 12 per cent will help 2.3 million people but won’t help everyone.
“Working for longer will help and saving more will help but it's not a simple solution”
Bright suggested that some groups need a safety net and “that’s where the state needs to provide and to look at ensuring nobody slips through that net”.
She went on to argue that one potential solution was to change savers attitudes towards work and saving stating: “What is retirement, what is work - that’s what we need to start exploring”
Phoenix Insight’s report came to similar conclusions, outlining a number of steps that should be taken to bring savers actions more in line with their retirement expectations, such as engaging people more effectively in their future finances, and making working for longer more feasible, attractive and rewarding.
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