Retirement planning is getting harder as cost of living bites
Difficulties in retirement financial planning in the current economic climate are highlighted in the latest Scottish Widows Retirement Report. Contributions are falling, expected retirement ages are rising, and the likelihood of enjoying a ‘comfortable’ retirement is in doubt for some.
Here are the key takeaways and recommendations from the report.
Pension Contributions and Financial Wellbeing
A significant portion of UK adults are contributing to their pensions, with 62% actively saving for retirement. However, there remains a concerning 20% who are not saving at all. Financial anxiety is rampant, with 35% of individuals expressing worries about their retirement finances. This highlights the broader issue of financial stress and its impact on retirement planning.
The Widening Savings Gap
The report reveals a stark savings gap between what individuals currently save and what is necessary for a comfortable retirement. On average, people are saving less than half of the recommended amount. This gap is exacerbated by the challenging economic environment marked by high inflation and rising living costs. In fact, 45% of respondents have reduced their pension contributions due to the cost-of-living crisis.
Shifting Retirement Age and Expectations
There is a noticeable trend towards later retirement, with the average expected retirement age now at 66. Many individuals are also considering flexible retirement options, planning to work part-time before fully retiring. This shift reflects changing expectations and the need for continued income in the face of inadequate savings.
Gender Disparities in Retirement Savings
The report highlights significant gender disparities in retirement savings. Women are more likely to face financial difficulties in retirement, with a persistent gender pension gap resulting in women saving less on average compared to men. Addressing this gap is crucial for ensuring equitable financial security for all retirees.
Health Concerns and Retirement Planning
Health issues are a major concern influencing retirement planning. About 25% of respondents worry about their health in retirement, which in turn affects their saving behaviour. This emphasises the importance of considering health-related expenses and planning accordingly.
Conclusion
The report highlights the urgent need for better retirement planning and savings strategies to ensure financial security in retirement, especially in light of current economic challenges. Addressing the savings gap and providing more support and education around retirement planning are argued to be crucial steps to improve future retirees’ financial wellbeing.
