Pensions spotlight: Almost half of DC pension holders not confident about retirement

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British pension holders’ confidence regarding their prospects for a comfortable retirement is almost evenly divided, according to a new study by Censuswide on behalf of consultancy Barnett Waddingham.

The study, which polled 2,000 respondents in March, found just over half (52%) of people with defined contribution (DC) pension plans believe they will be financially comfortable in retirement – with 48% admitting they’re not as optimistic.

DC pensions, commonly used as workplace pensions, depend on various factors such as contribution amounts, investment performance, and how the funds are utilised during retirement.

The research also highlighted that older workers often feel less confident about their retirement – and most concerningly, nearly a third (32%) of those set to retire within two years are still in a position where they doubt they’ll enjoy a comfortable retirement.

In contrast, younger adults are more relaxed about the prospect, with 71% of those aged 24 and under – and 61% of those aged 25 to 30 – feeling confident about their retirement prospects.

However, as Eadon & Co’s Managing Director, Tim Eadon, notes, there’s no guarantee that the under 30s polled will continue to remain as positive in the decades ahead – for example, as pension age draws closer and they become more familiar with the full extent of the costs that come with retirement – meaning the study’s overall figures could be giving a falsely optimistic impression.

The introduction of automatic enrolment into workplace pensions in 2012 meant that employees are now automatically enrolled into a pension scheme unless they opt out. This includes additional contributions from employers and tax relief.

Despite this, only about 42% of individuals aged 51 to 55 report feeling confident about their retirement – with this number increasing to 50% for those aged 55 and older. And alarmingly, 4% of people across all age groups – or around one in 20 – don’t currently feel they’ll ever be able to retire.

The survey also uncovered that a small percentage of homeowners, both outright (2%) and those with mortgages (3%), never expect to retire. This percentage increases for those in private rental accommodation (5%) and social or council housing (7%).

The research looked to uncover the extent to which, and why, UK workers feel confident about their retirement. It’s worth noting that many confident individuals have additional sources of income beyond their DC pension. Approximately 29% have other investments and 28% own their property outright. The survey also indicated that men are more likely to have other investments than women.

What’s more, older workers who feel confident are more likely to have a defined benefit (DB) pension in addition to their DC pension. DB pensions promise a certain income based on salary, for example final salary pensions.

The study found that 8% of employees who feel unfazed about their financial resilience in retirement have a DB pension – with this figure rising to 18% among those aged 51 to 55 and 19% for those aged 61 to 65. Additionally, 20% of confident savers attribute their confidence to being enrolled in a workplace pension.

Elsewhere, the wide-ranging survey found that, among those who lack confidence, 35% believe they simply haven’t saved enough – highlighting the need for savers to pay more and earlier attention to retirement planning – while 19% haven’t saved enough for both themselves and their spouse and 32% feel don’t earn enough to save adequately.

Nearly 29% lack other savings or investments beyond their DC pension and 12% are not confident due to the expectation they’ll be to renting their accommodation into retirement.

Indeed, a significant issue is the lack of visibility around retirement planning. Over a quarter (26%) of those who don’t feel optimistic about their prospects admitted they don’t know what a comfortable retirement would looks like for them or how to achieve it, and 8% haven’t even thought about retirement at all.


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Source: Shaw, Vicky. The Independent. June 2024. 


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