More than half of UK pension savers are building retirement wealth outside of pensions, with a heavy reliance on cash according to new research.
Interactive Investor found that 57 per cent of adults with a pension are also saving for retirement through cash savings, Isas, buy-to-let property or general investment accounts. It says that while this suggests growing engagement with retirement, there was a concern that many of these savers were relying too much on low-yielding cash for longer-term savings goals.
Outside of pensions, this survey showed P people are more than twice as likely to save for retirement in cash (43 per cent) than through a stocks and shares Isa (21 per cent), despite the latter typically offering stronger long-term growth potential.
This survey comes as the Chancellor recently announced a series of measures in the Budget designed to boost investment into stock markets and other longer-term growth opportunities. This includes limited the amount cash Isa limits for the under 65s while also encouraging pension schemes to further diversify assets into private markets.
Camilla Esmund, senior manager at interactive investor, said ongoing changes to pension rules had damaged public confidence and risked discouraging long-term saving.
“The constant tinkering of the pension rules is harming public trust in pensions, disincentivising retirement saving, and risks widening the pension engagement gap in the UK,” she said.
“Cash has an important role as a short-term buffer, but over time its value is typically eroded by inflation,” she said. “Relying on cash for retirement risks missing out on years of investment compounding, which could materially damage retirement prospects.”