Pensions: 53% of people think they will cease to exist

Isobel Lawrance 19th Oct 2021 One Comment

Reading Time: 6 minutes

Between March and July 2021, over 10,000 respondents across the UK took part in The Great British Retirement Survey 2021. Conducted by CoreData on behalf of pension provider Interactive Investor, the survey seeks to gain insight into the thoughts and opinions of both people who already receive their pensions, and those of working age who expect to receive pensions in the future.

The survey consisted of over 100 questions, with many respondents going into great detail. It is important to understand the experience of others and how they feel about their current or future pensions. This imperative in understanding what retirement looks like in modern Britain.

Here, we discuss some of the main findings of the survey, and how opinions differ as the result of world events, education, tax and ethics.

The Coronavirus pandemic
Attitude to risk
Information and Education
Pensions complexity
Financially vulnerable groups
Tax and regulation
Ethical investing

The Coronavirus Pandemic

Surprisingly, respondents claimed they made more financial gains than losses overall due to Covid-19. More than a third (36%) of those surveyed claimed they had seen their wealth increase. However, 21% of respondents saw a loss of wealth, and 13% had either been made redundant or lost income.

Despite this, the pandemic has left people more worried than ever about the financial markets. Markets have managed to recover most of the losses seen at the beginning of the pandemic, with the FTSE 100 index reaching 94% of its pre-pandemic high in August 2021.

However, concerns about the future value of shares remain high. Almost half of both non-retired (49%) and retired (47%) respondents listed this as one of their top three concerns financially.

The results of the survey also showed these concerns are impacting respondent’s retirement plans. Of the non-retired respondents, one in five (20%) suggested they are more likely to need to work during their retirement to make up for any shortfalls, 10% think they may need to delay retirement and 7% are more likely to buy an annuity to ensure a guaranteed income.

Attitude to risk

Many respondents spoke of a wish to have understood more about investment risk and the benefits of taking a higher-risk approach at a younger age. Over a third (39%) of non-retired respondents said they wished they had understood more about risk earlier in life. 30% of retired respondents said the same.

Surprisingly, most people’s attitudes to risk were not impacted by the pandemic. A huge 78% of retired respondents suggested they are neither more nor less risk-averse or risk-tolerant as a result of the pandemic. 70% of non-retired respondents also said the same, and their attitude had not changed due to Covid-19.

Information and education

The survey also showed that more than ever, people are utilising the internet to do their own financial research online. Almost two thirds of respondents (65%) said they do their own research online when it comes to financial matters such as investments and pensions.

This is a significant increase on the results from 2020’s survey. Interactive Investor suggest this could potentially highlight the extra time people had during Britain’s lockdowns. They may have used this time to research their finances, financial services and use the time to learn about how to manage and grow their wealth and investments.

Pensions complexity

Pensions can be a confusing concept for many, as they are so multifaceted. Additionally, most adults have multiple pension pots, increasing confusion and the risk of losing track of retirement savings. 66% of non-retired respondents had multiple pension pots, with 15% of these having four or more pots.

A risk highlighted in the survey was that one in 17 of the non-retired respondents (6%), had no idea at all how many pension pots they have. This is a risk due to the potential to lose track of some of their retirement income.

Although pensions were the respondents’ most important source of retirement income, 65% and 60% for retired and non-retired respondents respectively, many planned additional income sources. Such sources of income include property as an investment, a method which respondents showed a strong interest in.

Half of respondents also suggested they had stocks and shares ISAs, and one in five already owned buy to let properties.

Financially vulnerable groups

The survey highlighted many of the financial inequalities faced by vulnerable groups when it comes to pensions.

Almost half (45%) of non-retired respondents with a disability said it had hindered their retirement prospects. A third of respondents said they were unable to earn as much over their lifetime, and consequently, 12% said they had not been able to save as much money. Many highlighted the costs of care, whether it be spending money on care, or reducing their income in order to become a carer for their loved one.

Respondents who are self-employed also highlighted how this impacted their retirement prospects. 20% of self-employed respondents said it’s negatively impacted their retirement prospects. Additionally, 15% said they were relying on the sale of their business to generate retirement income.

Although self-employment shows elements of risk, many recognised the benefits of this type of work. These include the opportunity to continue working for longer and slowly move into retirement.

Renters were significantly more worried about housing costs than homeowners. Shockingly, only 32% of non-retired renters think their pension will be enough to cover their rent and living costs when they retire. 38% were unsure whether their living costs would be covered by their pensions.

Those who have fallen victim to financial scams and fraud also indicated they were less likely to be able to get their money back than in previous years. Although fewer respondents reported falling victim to a financial scam than in 2020 (9% compared to 13% last year).

Of those, only 34% had received their money back, a decrease of 9% from last year. 56% had not received their money back, and 11% were still waiting for a decision. Although people seem to be savvier when it comes to online financial scams and fraud, it seems the blame is being placed on the victim more than ever.

Tax and regulation

Of respondents aged between 24 and 29, 53% said they were not confident that the state pension would still exist to provide for them when they reached retirement age. 26% of respondents in their thirties said the same.

The Lifetime Allowance also raised concerns. 21% of non-retired respondents think they may be charged as a result of breaching the limit. A further 24% concerned they will be near the affected threshold.

30% of non-retired respondents listed increases to tax as a top-three financial concern of theirs.

Ethical investing

The concept of ethical investments has gained popularity as it has entered the mainstream. This is shown in the results of the survey. Nearly half of respondents invest ethically at least some of the time.

Of those who invest ethically, 6% said they did all the time, 40% said they did sometimes, and 6% said they did not currently, but would like to do so. 38% of respondents thought ethical investments should be the default option when it comes to workplace pensions.

35% said their pensions were invested in a way that they believed aligned with their moral values. Results show a need for an improvement in information given to people about where their workplace pensions are invested. 41% said they did not know where their pensions were being invested at all. Although this has decreased from last year’s figure of 54%, it shows there is still room for greater education and information to be provided to those with a workplace pension.