"Without a notable shift in saving patterns, many will be in for a rude awakening. Aspirations with no plans are just pipe dreams."
- Paul Leandro, Partner at Barnett Waddingham
Of those surveyed (5,000), only 15% of adults have set clear financial goals or budgets for their retirement; Barnett Waddingham has revealed a concerning gap between retirement dreams and the reality of financial planning.
More than half (53%) of Gen X (43 to 58 years old) are confident they’ll have a comfortable retirement but a staggering 41% aren’t assured. Only 12% have clear financial goals and a budget for retirement; 33% of Gen X have a rough idea of finances for retirement, 16% don’t have a budget but intend to start planning, and 13% don’t have a budget and don’t plan on taking any measures to improve their financial position.
More than half of Gen X (51%) have a DC pension, whilst only 30% have a DB pension. Worryingly, 49% of this generation believe the state pension will be a critical retirement income. Given that the state pension in the UK currently provides a maximum of £10,600 annually, this reliance could leave many retirees struggling to cover even the basic expenses.
Barnett Waddingham believes the UK is on the brink of a retirement crisis, which will lead to retirees working for longer, depending on family support, or facing a diminished quality of life.
“There is a chasm between expectations and reality when it comes to adults in the UK thinking about their retirement. People – especially those in their 40s and 50s – are being driven to dream of a retirement filled with travel, pursuing hobbies, and even a life overseas. But the life on offer may be a mirage; the aspirational lifestyle so readily on display by their parents and loved ones today is most likely funded by DB pensions – a luxury which won’t be there for the retirees of tomorrow,” explained Paul Leandro, Partner at Barnett Waddingham.
Mark Futcher, Head of DC at Barnett Waddingham, added: “Sadly, there’s no silver bullet to the ticking pensions timebomb. But some changes could make a real difference. Firstly, improve the auto-enrolment system, by widening who it includes and increasing minimum contributions. The aspiration should be to build a DC system that generates employees a comfortable retirement over the course of a career, without needing further wealth to survive.”
