Hope for 2.4 million Feeling the Squeeze: New research identifies potential £50,000 boost to pension savings
27 July 2016
- Feeling the Squeeze - Over a third (34%) of 35 to 44 year olds say they are Squeezed, struggling to meet day-to-day expenditure.
- Don’t quit- 92% believe they should be saving and of those who said they need to save, over half (54%) say that they don’t save more because they can’t afford to do so.
- All is not lost – By reviewing their finances when debts are cleared, the Squeezed could secure a potential boost of £50k pension savings for their retirement.
- Get talking –Nearly half (45%) of the 35 to 44 year olds intend to seek professional advice in the future.
Royal London’s second Pensions Through The Ages Report, Feeling the Squeeze shows that, over a third (34%) of people aged 35 to 44 are Squeezed, saying that paying bills and meeting everyday commitments is a constant struggle. This equates to 2.4 million people UK wide. The research shows that they are focused on paying for the ‘here and now’, with retirement planning and saving close to the bottom of their list of financial priorities. With house prices rocketing and many at an age when they are considering or have started a family, other life-stage finances are their main priority.
When asked to consider their financial position, the survey of nearly 2,500 people aged 35-44 across the UK, identified two clear groups: Over a third (34%) considered themselves Squeezed where keeping up with bills and repayments is a constant struggle, while another 37% said that their finances are Manageable, as they struggle with their finances from time to time. In addition to these two groups, nearly a quarter (23%) said they consider themselves Comfortable as they are able to keep up with payments without difficulty. The remainder said that their current financial situation is Unmanageable, (6%).
Worryingly, over two thirds (68%) of the Squeezed group say that they can’t currently afford to save more for their retirement and over four fifths (83%) of this group believe that their finances will feel Squeezed or even Unmanageable in their retirement. Nearly two thirds (61%) of the Squeezed say that it is very likely or somewhat likely they will retire later, expecting to do so at an average age of 68, three years later than the current state pension age of 65.
Fiona Tait, Pensions Specialist, Royal London said: “Planning for retirement is becoming an increasing concern for many as the reality hits that financial responsibility is shifting from the state to the individual.” Fiona continued: “What is promising is that nine in ten (92%) understood that they should be saving and investing, but with cost of living and other lifestyle priorities those who said that they need to save more over half (54%) said they just can’t afford to do so. Finding ways to help them achieve a step change to improve their position is key; if left to do nothing, many believe they will either remain Squeezed in retirement or worse, be in the position where their finances are Unmanageable and rely on state benefits.”
A Step Change to improving pension savings
Despite the number saying that they are not in a position to save now, the findings show that there are potential windows of opportunity, Savings Moments of Truth, Savings MOTs, where the Squeezed could start saving for their retirement:
- In the next five years: Over three quarters (76%) said that they would save more if they received a pay rise. A quarter (25%) expect their household income to increase this year, while 40% expect an increase within three years and 45% within five years.
- Six to nine years: The Squeezed said they expect to redirect current financial debt repayments into retirement savings when they are paid off, such as credit cards, loans or car finance. The extra £171 per month on average could secure a pension pot of £50,000 by their retirement.
- In nine years: An average of £14,000 in childcare costs could be freed up from university fees.
- Closer to retirement: On average, the Squeezed, say they aim to pay off their mortgage five years before they retire. This could provide an additional £19,000 savings to boost their pension pots.
Other savings opportunities the Squeezed mentioned as current spending that could be redirected into savings in the future included hobbies/leisure activities, holidays and home maintenance.
The research also shows there is a clear need for tailored advice for those who are Feeling the Squeeze. A Royal London poll of financial advisers revealed that nearly three quarters (73%) said their clients aged 35 to 44 are engaged with their retirement savings. The research found that those who say their finances are Manageable or Comfortable are more likely to regularly review their finances at least quarterly (45% and 50%) compared to only 41% of those who are Squeezed. 45% of advisers who have clients that are feeling Squeezed confirmed that they are currently not able to save more.
Commenting further, Fiona Tait said: “It is great to see that nearly half (45%) of the Squeezed say they will speak to a professional adviser about retirement saving in the future. The world of pension provision has shifted and in a Defined Contribution world it is really important that everyone understands that the onus is now on them to fund their retirement. No matter now big or small the saving, it all adds up. Taking action when the opportunity arises, even if it is in five to 10 years’ time could still fundamentally change peoples’ financial position in retirement. Advisers are well placed to help explain how.”
A copy of Royal London’s second Pensions Through The Ages: Feeling the Squeeze Report is available to download from the Royal London website at www.royallondon.com/FeelingtheSqueeze. Royal London also offers a Lifestyle Planner which helps to identify potential savings opportunities from day to day expenses which is available to view at, http://yourplan.royallondon.com/contributions/lifestyle-planner/.
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Interviews, case studies, tips, infographics and further research findings are available upon request.
Journalists wanting further information please contact:
Berni Ryan, Corporate PR Manager
T: 020 7506 6740 M: 07919 170 127
Tom Johnson, Press Officer
T: 020 7506 6620 M: 07919 170 771
Elspeth Rothwell, Managing Director– FTI Consulting
T: 020 3727 1481 M: 07811 375 998
Notes to editors:
The findings of The Pensions Through the Ages: Feeling the Squeeze Report are based on in-depth quantitative analysis of 2,418 people aged 35 to 44 across the UK using a bespoke survey panel conducted by Harris Interactive UK from May 26th – June 9th 2016. Individuals were recruited from the original study by Harris Interactive to be involved in the case studies detailed in this Report. The adviser online poll was conducted by Royal London Intermediary marketing team from Thursday 16 June to Monday 20 June 2016 and is based on responses from 155 advisers.
The over £50,000 potential saving is based on the amount that the Squeezed said they will aim to save for a person aged 39.5 with retirement age at 65; the loan repayment completed after 6 years so £98 per month saved for 19.5 years to retirement and the finance plan ending after 8 years so £73 saved for 17.5 years to retirement. This secures potential pension savings of £32,640 and £21,480 respectfully, so £54,120 in total.
About Royal London:
Royal London is the largest mutual life, pensions and investment company in the UK, with Group funds under management of £87.9 billion. Group businesses provide around 9.1 million policies and employ 3,051 people. (Figures quoted are as at 31 March 2016).