Retirement saving remains insufficient (Birmingham Post article 11.01.2024)

Retirement confidence is unlikely to improve anytime soon maintains the Nucleus UK Retirement Confidence Index.

Part of the problem, it suggests, is too few people prepared to pay for financial advice.

The report, which we summarised last week, found that only 11% of adults had purchased such advice in the last two years.

The main sources of information for those unwilling to stump up were friends or family and their own research on product provider websites, with some consulting the personal finance sections of newspapers and specialist money publications.

It goes on: “The complexity of retirement planning, of tax planning and mitigation can’t be overstated. It’s not reasonable to assume consumers will have any real understanding of this. Adults approaching or thinking about retirement income need informed, impartial input. This must take into account all aspects of their assets, requirements, goals and personal circumstances. The only route to this point is professional, regulated financial advice. Advice works, and we need to find ways to encourage more people to access it.”

Yet this seems a tall order.

“However, we also need to accept the advised cohort will only ever be a minority of people. Many others need help and education, ideally personalised to their situation. And we need to find ways to deliver this to the millions of people saving through auto-enrolment. The long tail of defined benefit (DB) pensions coming to maturity is bolstering UK retirement confidence. This is clearly not sustainable, and we predict the UK Retirement Confidence Index will fall over the next few years as a consequence.”

So, what can be done?

The so-called pensions dashboard trumpeted by the government but not yet in place is seen as crucial. It will allow individuals to access their pensions information online, securely and all in one place.

Nucleus appeals: “Make the pensions dashboard happen, make it soon and make it effective. This will simplify and speed up the process of finding and consolidating pension funds, a major obstacle for many consumers.”

It calls for “stronger, clearer public messaging around planning for the future that will motivate and empower people to take appropriate action”.

The report urges: “Stop the pension legislation merry-go-round. Pensions are a long-term arrangement, and the legislative process should reflect that. Simple, stable and accessible should be the watchwords. Setting up an Independent Pensions Commission to develop long-term proposals for pensions and savings policy would bring much-needed consistency.”

Meanwhile, funding and promoting financial education in schools would provide “a good start to solving the problems of retirement income provision for future generations”.

It continues: “We need to normalise saving into a pension from as early an age as possible.”

Nevertheless, ultimately it is all about money.

“To make meaningful positive changes to retirement confidence, we need more adults who save more into their pensions, understand why they’re saving, and what for, and are empowered to save for their retirement in an environment of trust and stability. These three elements are essential if we’re to achieve growth in genuine, meaningful retirement confidence. There’s a good deal of work ahead of us to get there, but working together with this collective goal means real movement is achievable.

“Most experts accept an eight per cent auto-enrolment contribution isn’t sufficient. There’s a need to consider how and when an increase should take place and whether this should, for example, be age-related. The current economic position isn’t conducive to asking employers or individuals to pay more but there will never be a perfect time. We should aim for contributions to start gradually increasing before 2027, fifteen years after the introduction of auto-enrolment.”