Employees’ financial priorities shift over their working lives, with many delaying serious retirement saving until their 40s, a decision that can leave them struggling to close the gap later on, according to Fidelity.
The study of more than 3,000 workplace pension scheme members highlights the “financial balancing act” employees face as they juggle competing goals, from paying everyday expenses to saving for a first home, often at the expense of long-term security.
The research found that for younger members (18–34), the focus is mostly on short-term needs. About a third or 35 per cent are saving for a home, and nearly as many, around 29 per cent, are prioritising everyday expenses. Only a small group, 15 per cent, are thinking seriously about retirement.
Meanwhile, by mid-career, which is between 35–44, everyday expenses become the top priority for 40 per cent, with fewer savings for property (18 per cent) and more beginning to consider retirement (28 per cent).
It is only between ages 45–54 that retirement planning takes precedence, with 39 per cent prioritising it, just ahead of everyday expenses at 37 per cent, while saving for property drops to 9 per cent.
The research also highlights uncertainty about long-term savings. Around 40 per cent of members say they want help understanding how much they should be contributing to achieve a comfortable retirement, rising to 50 per cent among those under 55.
The consequences of not addressing this are already apparent: one in five respondents aged over 55 expect to work longer than planned. Of those, nearly two-thirds or 62 per cent said this was because of a shortfall between what they have saved and what they need, or due to changing financial circumstances.
Fidelity International head of workplace investing distribution Daniel Smith says: “At the start of your working life it can feel as though there is an endless list of financial goals to work towards – from repaying student loans to saving for a first home. These immediate goals naturally take precedence over longer-term planning, such as saving for retirement.
“However, waiting until your 40s or 50s before prioritising your retirement savings can result in a significant gap between what’s saved, and what’s needed for a comfortable retirement. Individuals need access to tools and guidance that enable them to balance short-term financial needs and goals throughout different life stages in a tax efficient way. With the right support, these goals don’t have to compete – they can coexist.
“As these findings suggest, many individuals want a clearer sense of what ‘good’ looks like when it comes to retirement saving. Knowing how much to contribute – and when – is critical to building confidence and avoiding shortfalls later in life.
“It’s crucial that employees have access to the right support, tools and guidance that help them feel in control of their finances throughout their working lives and make the best decisions for their personal goals. While many will undoubtedly be juggling several different savings goals at any one time, it’s important to help individuals balance and prioritise the impact, timing and tax efficiency of saving decisions throughout their lives, including saving for retirement.
“Financial wellness is about understanding an individual’s total financial situation. We believe this begins when someone first starts saving and extends well beyond their working life – managing changing priorities along the way.
“Employers are often the gateway through which employees access educational resources, by partnering with financial services providers to implement financial wellness programmes. Raising awareness of these programmes enables employees to benefit from the support available to them – understanding how to maximise their workplace benefits and maximise their pension contributions.
“We offer support at every stage of this journey – from the information and guidance we offer, supporting individuals through life events, to the online tools and resources we’ve developed to help people plan with confidence. Across both our workplace and retail channels, we continue to invest in resources to help people make smarter decisions – improving support from calculators to coaching and on to financial confidence.”
