Millions of people will struggle financially later in life unless there is concerted action taken by both the government and employers to address this growing crisis.
This was the conclusion of new research from Phoenix Insights, a think tank looking at longevity issues.
Its latest report found that almost half the population were not confident they would be able to save enough for retirement.
This problem is being exacerbated by money pressures elsewhere, and could worsen with the ongoing squeeze on living standards. Its report found that even before this cost-of-living crisis, two in five worried that they could not afford to put aside enough money for older age. Meanwhile, one in five stated that paying off debts was preventing them from saving.
The research suggests the saving gap will lead to greater demands being put on family members, and a need to employment options later in life to plug these holes.
However, it also found that one in four people were not confident in their ability to secure work at a later age, and are concerned factors like ill health, discrimination or not having the right skills will stop them from earning and saving what they need for retirement.
This study comes as an additional new poll commissioned by Phoenix Insights found two in five (41 per cent) adults expect to use some or all of their savings to cover the cost-of-living crisis, while 14 per cent have no savings to use at all. The impact of rising inflation from increased energy tariffs will mean 27 per cent say will save less money for the future, according to this survey.
The report, A Crisis of Confidence, found that around a third of consumers (36 per cent) who were confident about saving enough for retirement still had a substantial savings gap (according to their own goals) of over £100,000. Phoenix points out this isn’t just younger savers, half of those in this group were aged over 45. In addition, the report found that a significant number of people (7 million) expect to rely significantly on money from friends and family in later life
Phoenix Insights warns that there is a need for action to tackle the twin problems of increased longevity and lower savings ratios. It is calling on the government and employers to initiate a range of new measures. These include:
- Eradicate workplace ageism and support skills development and reskilling throughout life. Phoenix says employers must be proactive about tackling age-bias in recruitment, enable flexible working, support staff with caring responsibilities, and encourage career development and training for staff of all ages.
- Tackle regional inequalities and improve pay and progression. Phoenix says the government should use the levelling up agenda to tackle in-work poverty and the prevalence of precarious jobs with very low pay and few prospects for progression. This will enable more people to save for the future.
- Expanding auto-enrolment. Phoenix calls for AE to cover both the self-employed people and those aged under 22. Additional defaults should be explored, such as auto-escalation of pension contributions when salary increases, along with nudges when personal circumstances might change that enable greater interest/capacity for saving – for example, children leaving home.
- Boost financial information, guidance and education. Phoenix says people should be able to get more holistic financial guidance and advice at a much younger age. It calls for regulators to make access to good advice and support the norm, rather than the preserve of the wealthy few.
Catherine Foot, director of Phoenix Insights, said: “Living longer is one of the greatest gifts of the 21st century and we all want to make the most of it. But our report reveals it’s a serious fear for nearly half of us.
“Millions of people are concerned they may be unable to support themselves financially in later life and are not confident they can act now to improve their financial future.
“Part of the problem is that we still seem to be living with a mid-20th century model of life, yet so much has changed. Many of us in the UK will spend a third or even more of our adult life over the age of 65 – but it’s going to be hard for lots of us to sustain what could be a 30-year retirement or more from only 40 years of working.
“Though government is facing many other pressures and priorities today, there is no doubt we need to act now to support people to save more and to stay in the workforce if they need to. We all need to come together to radically rethink our approach to work, training, housing and how we tackle health inequalities.”